Merry Company uses the cash basis of accounting. Merry Company made $600,000 in payments to its suppliers during the year. Merry's beginning inventory was $20,000, and its ending inventory was $35,000. In addition, Merry had a beginning accounts payable of $40,000 and an ending accounts payable of $70,000. What is Merry's cost of goods sold under the accrual basis of accounting?

Question

Quizplus · Accepted Answer

To calculate the cost of goods sold (COGS) under the accrual basis, we adjust the cash payments to suppliers by the changes in inventory and accounts payable. The formula is: COGS = Cash Payments to Suppliers + Ending Inventory - Beginning Inventory + Beginning Accounts Payable - Ending Accounts Payable. Plugging in the given values: COGS = $600,000 + $35,000 - $20,000 + $40,000 - $70,000 = $615,000.

Merry Company Uses the Cash Basis of Accounting