On May 1, there were 4 inventory items that cost $30 each. On May 5, 2 items were purchased for $35 each. Given one item from the beginning inventory and one from the May 5 inventory were sold, under the inventory method, cost of goods sold would equal $65.
Question
On May 1, there were 4 inventory items that cost 35 each. Given one item from the beginning inventory and one from the May 5 inventory were sold, under the inventory method, cost of goods sold would equal $65.
Solution
The text seems to be incomplete as it does not specify which inventory method is being used. There are several inventory methods such as First-In-First-Out (FIFO), Last-In-First-Out (LIFO), and Average Cost method. The cost of goods sold (COGS) would be calculated differently depending on the method used.
However, based on the information given, it seems like the method used is the Specific Identification method. This method allows businesses to track the exact cost of each individual item in the inventory.
Here's the step-by-step calculation:
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On May 1, there were 4 items in the inventory, each costing 30 = $120.
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On May 5, 2 more items were purchased, each costing 35 = $70.
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One item from the beginning inventory (costing 35) were sold. So, the cost of goods sold (COGS) is 35 = $65.
So, under the Specific Identification inventory method, the cost of goods sold would indeed equal $65.
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