Saturday, March 10, 2012

Calculate Beginning Inventory

Accounting Question:

A golf bag company had net purchases of $50,000, an ending inventory of $25,000, net yearly sales of $100,000, and total gross profits of $32,000.

How much was the golf bag company’s beginning inventory for the current year?

Detailed Solution to Accounting Example Problem:

Profit = Sales – COGS (Cost of Goods Sold)
32, 000 = 100,000 - COGS
COGS = 68,000

COGS (Cost of Goods Sold) = Beginning Inventory + Purchases - Ending Inventory
68,000 = Beginning Inventory + 50,000 – 25,000

Correct Answer to Problem:

Beginning Inventory = 43,000

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