A company uses a perpetual inventory system, and follows GAAP in preparing its external financial statements. At the end of 2002, the balance in the inventory account was $66,000; $6,000 of those goods were purchased f.o.b. shipping point and did not arrive until 2013. Purchases in 2013 were $30,000. The perpetual inventory showed an ending inventory of $72,000 for 2013. A physical count of the goods on hand at the end of 2013 showed an inventory of $60,000. What should the company report on its 2013 income statement for cost of goods sold?
A) $24,000
B) $30,000
C) $36,000
D) $42,000

Question

Quizplus · Accepted Answer

According to GAAP, cost of goods sold should reflect the cost of the inventory actually sold during the period. Therefore, we need to adjust for the $6,000 purchase that was not included in the 2013 ending inventory.

Cost of goods available for sale = beginning inventory + purchases = $66,000 + $6,000 + $30,000 = $102,000

Adjusted cost of goods available for sale = $102,000 - $6,000 = $96,000 (to reflect the purchase that did not arrive until 2013)

Cost of goods sold = adjusted cost of goods available for sale - ending inventory = $96,000 - $60,000 = $36,000.

Therefore, the company should report $36,000 for cost of goods sold on its 2013 income statement. The correct answer is C.

A Company Uses a Perpetual Inventory System, and Follows GAAP