Pina Colada Lake Corporation's accounting records show the following at year-end December 31, 2017: Purchase Discounts $7,700 Beginning Inventory $31,950 Freight-In 9,840 Ending Inventory 28,980 Freight-Out 10,050 Purchase Returns and Allowances 4,440 Purchases 164,480 Assuming that Pina Colada Lake Corporation uses the periodic system, compute cost of goods purchased and cost of goods sold.

Question

Business

Karlee Duran

6 January, 20:00

Pina Colada Lake Corporation's accounting records show the following at year-end December 31, 2017: Purchase Discounts $7,700 Beginning Inventory $31,950 Freight-In 9,840 Ending Inventory 28,980 Freight-Out 10,050 Purchase Returns and Allowances 4,440 Purchases 164,480 Assuming that Pina Colada Lake Corporation uses the periodic system, compute cost of goods purchased and cost of goods sold.

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Answers (1)

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Grace Mathews · Answer 1

(i) $162,180

(ii) $165,150

Explanation:

Cost of goods purchased (net):

= Purchases - Purchase discount - purchase returns and allowances + freight in

= 164,480 - $7,700 - 4,440 + 9,840

= $162,180

Cost of goods sold:

= Beginning inventory + net purchase - ending inventory

= $31,950 + $162,180 - 28,980

= $165,150

**Freight out does not form part of cost of inventory as it is not related to purchase. It is related to sales.