At the end of 2012, a company reported cost of goods sold of $4,800, which represented 80% of the goods available for sale. The beginning inventory amount was twice as much as the ending inventory amount. What was the amount of purchases for 2012?

Question

Quizplus · Accepted Answer

The cost of goods sold (COGS) is 80% of goods available for sale, so goods available for sale = $4,800 / 0.8 = $6,000. Let ending inventory be x, then beginning inventory is 2x. Goods available for sale = beginning inventory + purchases = ending inventory + COGS. So, 2x + purchases = x + $4,800. Since 2x + purchases = $6,000, solving these gives x = $1,200 and purchases = $3,600.

At the End of 2012, a Company Reported Cost of Goods