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Q4-8E

Expert-verified
Found in: Page 210

### Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

# The following supplementary records summarize Tesla Company’s merchandising activities for year 2017 (it uses a perpetual inventory system). Set up T-accounts for Merchandise Inventory and Cost of Goods Sold. Then record the summarized activities in those T-accounts and compute account balances.Cost of merchandise sold to customer in sales transaction$196,000Merchandise inventory, December 31, 201625,000Invoice cost of merchandise purchase, gross amount 192,500Shrinkage determined on December 31, 2017800Cost of transportation in2,900Cost of merchandise returned by customer and restored to inventory2,100Purchase discount received1,700Purchase return and allowances4,000 Answer Balance of merchandise inventory:$20,000.

Balance of cost of goods sold: \$194,700.

See the step by step solution

## Step-by-Step SolutionStep 1: Definition of Cost of Goods Sold

The account reported in the income statement representing the cost incurred by a business entity to produce the goods that have been sold is known as the cost of goods sold.