Clark's Chemical Company received customer deposits on returnable containers in the amount of $100,000 during 2016.Twelve percent of the containers were not returned.The deposits are based on the container cost marked up 20%.What is cost of goods sold relative to this forfeiture?

Question

Quizplus · Accepted Answer

The cost of goods sold is equal to the cost of the containers that were not returned. The cost of each container is equal to the deposit amount divided by 1.2 (since the deposits are based on the container cost marked up 20%). Therefore, the cost of the containers that were not returned is equal to $100,000 x 0.12 x 1/1.2 = $10,000.

Clark's Chemical Company Received Customer Deposits on Returnable Containers in the Amount