Dolan Company's accounting records reflect the following inventories: $$\begin{array} { l c c }
& \text { Dec. 31, 2017 } & \text { Dec. 31, 2016 } \
\text { Raw materials inventory } & \$ 310,000 & \$ 260,000 \
\text { Work in process inventory } & 300,000 & 160,000 \
\text { Finished goods inventory } & 190,000 & 150,000
\end{array}$$ During 2017 $800000 of raw materials were purchased direct labor costs amounted to $670000 and manufacturing overhead incurred was $640000. If Dolan Company's cost of goods manufactured for 2017 amounted to $1890000 its cost of goods sold for the year is

Question

Dolan Company's accounting records reflect the following inventories: $$\begin{array} { l c c } 
& \text { Dec. 31, 2017 } & \text { Dec. 31, 2016 } \
\text { Raw materials inventory } & \$ 310,000 & \$ 260,000 \
\text { Work in process inventory } & 300,000 & 160,000 \
\text { Finished goods inventory } & 190,000 & 150,000
\end{array}$$ During 2017 $800000 of raw materials were purchased direct labor costs amounted to $670000 and manufacturing overhead incurred was $640000. If Dolan Company's cost of goods manufactured for 2017 amounted to $1890000 its cost of goods sold for the year is

Quizplus · Accepted Answer

To find the cost of goods sold, we need to start with the formula:

Cost of Goods Sold = Beginning Inventory + Cost of Goods Manufactured - Ending Inventory

Unfortunately, the beginning and ending inventories are not given, so we cannot use this formula directly.

However, we do know that the cost of goods manufactured was $1,890,000, which means that this is the total cost of all goods that were completed during the year. To find the cost of goods sold, we just need to adjust this amount for any changes in inventory that occurred during the year.

One common assumption is that the ending inventory is equal to the beginning inventory. If we make this assumption, we can simplify the formula to:

Cost of Goods Sold = Cost of Goods Manufactured - Ending Inventory

To find the ending inventory, we can use the formula:

Ending Inventory = Beginning Inventory + Purchases - Cost of Goods Sold

We know that purchases were $800,000, and we can assume that the beginning inventory was zero (otherwise it would have been given). Substituting these values into the equation, we get:

Ending Inventory = 0 + $800,000 - Cost of Goods Sold

Simplifying, we get:

Ending Inventory = $800,000 - Cost of Goods Sold

Now we can substitute this expression for ending inventory into the earlier formula:

Cost of Goods Sold = Cost of Goods Manufactured - Ending Inventory
Cost of Goods Sold = $1,890,000 - ($800,000 - Cost of Goods Sold)
2 x Cost of Goods Sold = $1,890,000 - $800,000
2 x Cost of Goods Sold = $1,090,000
Cost of Goods Sold = $545,000

Therefore, the answer is C) $1,850,000.

Dolan Company's Accounting Records Reflect the Following Inventories During 2017 $800000 of Raw Materials Were Purchased Direct Labor