The Small Company uses the cash basis of accounting.Small Company made $28, 000 in payments to its suppliers during the year.Small's beginning inventory was $2, 000, and its ending inventory was $1, 000.In addition, Small had a beginning accounts payable of $7, 000 and an ending accounts payable of $4, 000.What is Small's cost of goods sold under the accrual basis of accounting?

Question

Quizplus · Accepted Answer

Cost of goods sold = Beginning inventory + Purchases - Ending inventory= 2,000 + 28,000 - 1,000= $29,000However, under the accrual basis of accounting, we need to adjust for the change in accounts payable.Cost of goods sold = Beginning inventory + Purchases - Ending inventory + Beginning accounts payable - Ending accounts payable= 2,000 + 28,000 - 1,000 + 7,000 - 4,000= $30,000

The Small Company Uses the Cash Basis of Accounting