For last month, Perma Corp.'s cost of goods sold and ending inventory were $100,000 and $150,000 respectively.Assuming Perma had neither purchases nor returns during the month, what was the cost of its beginning inventory?

Question

Quizplus · Accepted Answer

The formula for calculating Cost of Goods Sold (COGS) is:
COGS = Beginning Inventory + Purchases - Ending Inventory

We are given that COGS is $100,000 and ending inventory is $150,000, but we don't know the purchases for the month. However, we do know that there were no purchases or returns during the month. This means that the beginning inventory must be large enough to cover the COGS and ending inventory for the month. So, we can use the following equation to find the beginning inventory:

Beginning Inventory = COGS + Ending Inventory - Purchases

Since there were no purchases, the equation simplifies to:

Beginning Inventory = COGS + Ending Inventory

Substituting the given values, we get:

Beginning Inventory = $100,000 + $150,000 = $250,000

Therefore, the cost of Perma Corp.'s beginning inventory was $250,000.

For Last Month, Perma Corp