Assume ZY company has begning inventorŷ 60,000 ending inventory 90,000 and net sales 68,000 determine the amounts to be reported for cost of goods sold and gross profit.
To determine the cost of goods sold, we need to subtract the ending inventory from the beginning inventory:
Cost of Goods Sold = Beginning Inventory - Ending Inventory
Cost of Goods Sold = 60,000 - 90,000
Cost of Goods Sold = -30,000
The negative value of $30,000 indicates that the company's ending inventory is greater than the beginning inventory, which means that the company may have overestimated the amount of goods sold or made an error in recording the inventory values.
To calculate the gross profit, we subtract the cost of goods sold from net sales:
Gross Profit = Net Sales - Cost of Goods Sold
Gross Profit = 68,000 - (-30,000)
Gross Profit = 68,000 + 30,000
Gross Profit = 98,000
The company reported a gross profit of $98,000.