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31 January, 14:57

Prepare the cost of goods sold section of the income statement at December 31, 2017, for each company in Merchandising Business and Manufacturing Business.

Shown here are annual financial data at December 31, 2017, taken from two different companies.

Music World Retail Wave-Board Manufacturing Beginning inventory Merchandise $200,000Pinished goods $500,000 Cost of purchases 300,000Cost of goods manufactured 875,000 Ending inventory Merchandise 175,000Finished goods 225,000

Required: 1. Prepare the cost of goods sold section of the income statement at December 31, 2017, for each company in Merchandising Business and Manufacturing Business.

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  1. 31 January, 18:42
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    Answer: (a) $325,000

    (b) $1,150,000

    Explanation:

    (a) For Music world retail:

    Cost of goods sold = Goods available for sale - Ending merchandise inventory

    = (Beginning merchandise inventory + Cost of purchases) - Ending merchandise inventory

    = ($200,000 + $300,000) - $175,000

    = $500,000 - $175,000

    = $325,000

    (b) For Wave-Board Manufacturing:

    Cost of goods sold = Goods available for sale - Ending finished goods inventory

    = (Beginning finished goods inventory + Cost of goods manufactured) - Ending finished goods inventory

    = ($500,000 + $875,000) - $225,000

    = $1,150,000
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