Q16-6SE - Horngren'S Financial And Managerial Accounting

Question

Computing cost of goods sold, merchandising company 

Use the following information for The Windshield Helper, a retail merchandiser of auto windshields, to compute the cost of goods sold: 

Web Site Maintenance $ 7,900 

Delivery Expense 400 

Freight In 2,400 

Purchases 47,000 

Ending Merchandise Inventory 5,500 

Revenues 63,000 

Marketing Expenses 10,700 

Beginning Merchandise Inventory 8,600

Step-by-Step Solution

Answer

The cost of goods is computed as $52,500

Definition of COGS

COGS stands for the Cost Of Goods Sold.  It refers to the number of goods that are sold to the customers.

Computation of COGS

Computation of Cost of goods sold
COGS	Amount ($)
Beginning Merchandise Inventory	$8,600
Purchase and freight in (47,000+2,400)	$49,400
Cost of goods available for sale	$58,000
Ending Merchandise Inventory	-$5,500
Cost of goods sold	$52,500