8. Assume ZY company has beginning inventory 60,000, ending inventory 90,000,and net sales 680,000. Determine the amount to be reported for cost of goods sold and gross profit.

1 answer

To determine the cost of goods sold, we use the formula:

Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory

Given that the beginning inventory is 60,000 and the ending inventory is 90,000, we can substitute these values into the formula:

Cost of Goods Sold = 60,000 + Purchases - 90,000

To find the purchases, we need to rearrange the formula:

Purchases = Cost of Goods Sold + Ending Inventory - Beginning Inventory

Substituting the values, we get:

Purchases = Cost of Goods Sold + 90,000 - 60,000

Purchases = Cost of Goods Sold + 30,000

Now we have all the necessary information to calculate the cost of goods sold.

Next, to determine the gross profit, we use the formula:

Gross Profit = Net Sales - Cost of Goods Sold

Given that the net sales are 680,000, we can substitute this value into the formula:

Gross Profit = 680,000 - Cost of Goods Sold

Now, we can find the cost of goods sold and then determine the gross profit.

Let's solve for the cost of goods sold:

Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory
Cost of Goods Sold = 60,000 + Purchases - 90,000

To find the purchases, we rearrange the formula:

Purchases = Cost of Goods Sold + Ending Inventory - Beginning Inventory
Purchases = Cost of Goods Sold + 90,000 - 60,000
Purchases = Cost of Goods Sold + 30,000

Now we have all the necessary information to calculate the cost of goods sold.

Using the purchases formula, we have:
Cost of Goods Sold = 60,000 + (Cost of Goods Sold + 30,000) - 90,000
Cost of Goods Sold = Cost of Goods Sold + 60,000 - 90,000 + 30,000
Cost of Goods Sold - Cost of Goods Sold = -90,000 + 30,000 + 60,000
0 = 0

It appears that there is no definitive value for the cost of goods sold based on the given information. Therefore, we cannot determine the gross profit either.