A Company Started The Year With $10,000 Of Inventory. Purchases For Resale During The Year Were $20,000 | Multiple Choice Question (MCQ)

The correct answer of this question is (C), as by using the formula of Cost of Goods Sold (Cost Of Sales), we get the value of $25,000 as shown below:

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

Inventory of the beginning of the year is called Beginning Inventory while Inventory on 31st December is called Ending Inventory which is the goods remain unsold at the end of the accounting year.

Given:

Here Opening / Beginning Inventory = $10,000  |  Purchases for the year = $20,000 |  Closing / Ending Inventory = $5,000

By putting the values in the above formula, we have:

Cost of Goods Sold = $10,000 + $20,000 - $5,000

Cost of Goods Sold = $25,000

So, the cost of sales for the period is $25,000.