Taylor Company had beginning inventory of $1,180 and ending inventory of $1,680. Taylor Company had cost of goods sold amounting to $3,060. What is the amount of inventory that was purchased during the period? Multiple Choice OOO O $2,380 $5,920 $4,740 $3,560
Cost of goods sold is defined as the value (or carrying cost) of inventory of finished goods or trading inventory sold during a given period. It is often used to calculate gross profit and ultimately profit margins of a business entity.
If more than one entities are doing the similar business, the entity having least cost of goods sold will be most profitable as its Gross Profit and Gross Profit margins will be the highest assuming each entity has same turnover.
Cost of Goods sold calculated by reducing the value of ending inventory from Cost of goods available for sale.
Cost of goods available for sale is the aggregate of value of beginning inventory and cost of goods purchased during the period.
Thus, cost of goods sold can be calculated by using the following formula.
Cost of Goods sold = Beginning Inventory + Purchases – Ending inventory
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