Question

Purrfect Pets uses the perpetual inventory system. At the beginning of the quarter, Purrfect Pets has $36,000 in inventory. During the quarter the company purchases $8,800 of new inventory from a vendor, returned $1,300 of inventory to the vendor, and took advantage of discounts from the vendor of $260. At the end of the quarter the balance in inventory is $29,500. What is the cost of goods sold?

Answer 1

Answer:

$13,740

Explanation:

In the perpetual method of inventory valuation, the inventory balance is updated constantly after each transaction. In this problem, the initial balance is $36,000, purchases of new inventory will increase the balance, while returns, discounts and goods sold will decrease the balance. If the ending inventory is $29,500, the cost of goods sold (C) is determined as:

$36,000+8,800-1,300-260-C = 29,500\\C=\ 13,740$

The cost of goods sold was $13,740.