# How To Calculate Cost Of Goods Sold Is Computed From The Following Equation:

3. Cost of goods sold is computed from the following equation: a. sales – cost of goods purchased + beginning inventory – ending inventory. b. beginning . beginning inventory + ending inventory – cost of goods purchased. c. beginning inventory + cost of goods purchased – ending inventory. d. beginning inventory – cost of goods purchased + ending inventory. 0 Cleese Company sells merchandise on account for \$10,000 to Langston Company with credit terms of 3/10, n/30. Langston Company returns \$1,000 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? a. \$8,700 b. \$8,800 c. \$8,730 d. \$9.700

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Cost of Goods Sold: It is the cost ofacquisition is goods sold and is calculated by deducting the valueof inventory at the end from the Cost of goods available forsale.

Cost of Goods Sold = Cost of Goods available for sale – endinginventory ………. Equation 1

Also,

Cost of goods available for sale = beginning inventory + cost ofgoods purchased

By putting the value of cost of goods available for salein Equation 1 above we get

Cost of Goods Sold = (beginning inventory + cost of goodspurchased) – ending inventory

Therefore the correct answer for cost of goods sold isOption (c )

Cost of Goods Sold = beginning inventory + cost of goodspurchased – ending inventory

Calculation of Net amount tosettled the obligation within the discounted period

Gross value of merchandise sold by Cleese Company to LangstonCompany= \$ 10,000

Value of damaged merchandise returned by Langston Company toCleese Company= \$ 1,000

Net amount payable by Langston Company(before discount) = (Gross value of goods sold – value of damagedgoods returned)

Net amount payable by Langston Company (before discount) = \$10,000 – \$ 1,000

=\$ 9,000

Since, Langston Company will settled within discountedperiod, amount payable via check is :

Net Amount Payable = Value of Sales-Value of SalesReturn – Amount of discount

Net Amount Payable= \$ 10,000 – \$ 1,000 – \$ 270

Net Amount Payable = \$ 8,730.

Therefore the correct answer of the gives question isOption (c ) \$ 8,730

Working Note: Calculation of amount ofdiscount

Terms of credit: 3/10, n/30

The above terms of credit provided by Cleese Company impliesthat Langston Company pays the entire amount within 10 days fromthe date of sale of merchandise, a discount of 3% of the Net amountpayable (before discount) will be allowed, Else Net amount payable(before discount) will have to be settled within 30 days from thedate of sale of merchandise.

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