Question

For each of the following cases determine the ending balance in the inventory account. (Hint: First, determine the total cost of inventory available for sale. Next, subtract the cost of the inventory sold to arrive at the ending balance.)

a. Jill’s Dress Shop had a beginning balance in its inventory account of $47,500. During the accounting period, Jill’s purchased $97,500 of inventory, returned $6,500 of inventory, and obtained $900 of purchases discounts. Jill’s incurred $1,300 of transportation-in cost and $750 of transportation-out cost. Salaries of sales personnel amounted to $38,500. Administrative expenses amounted to $43,100. Cost of goods sold amounted to $97,300.

b. Ken’s Bait Shop had a beginning balance in its inventory account of $11,000. During the accounting period, Ken’s purchased $48,900 of inventory, obtained $1,500 of purchases allowances, and received $510 of purchases discounts. Sales discounts amounted to $790. Ken’s incurred $1,200 of transportation-in cost and $410 of transportation-out cost. Selling and administrative cost amounted to $13,800. Cost of goods sold amounted to $36,900.
cost of goods available for sale

ending inventory

Answer 1

a.	Determination of Ending balance in the inventory account
	Particulars	Amount (In $)
	Beginning Inventory	47,500
	Add:- Purchases (Net) (WN 1)	90,100
	Add:-Transportation-in Cost	1,300
	Total Cost of Inventory Available for sale	1,38,900
	Less:- Cost of Goods Sold	97,300
	Closing Balance of Inventory	41,600
WN 1	Purchases (Net)
	Particulars	Amount (In $)
	Purchases	97,500
	Less:- Returned	6,500
	Less:- Purchase Discount	900
	Purchases (Net)	90,100

b.	Determination of Ending balance in the inventory account
	Particulars	Amount (In $)
	Beginning Inventory	11,000
	Add:- Purchases (Net) (WN 1)	46,890
	Add:-Transportation-in Cost	1,200
	Total Cost of Inventory Available for sale	59,090
	Less:- Cost of Goods Sold	36,900
	Closing Balance of Inventory	22,190
WN 1.	Purchases (Net)
	Particulars	Amount (In $)
	Purchases	48,900
	Less:- Purchase Discount	510
	Less:- Purchase Allowances	1,500
	Purchases (Net)	46,890

Note:-	Cost of Goods Sold = Starting Inventory + Purchases – Purchase Returns & Allowances – Purchase Discounts + Freight In – Ending Inventory
	Ending Inventory = Starting Inventory + Purchases – Purchase Returns & Allowances – Purchase Discounts + Freight In – Cost of Goods Sold