The indication of the dollar amounts of beginning and ending merchandise inventory, which will be used to compute the cost of goods sold, is as follows:
- Beginning inventory = $60,500
- Ending inventory = $66,000.
What is the cost of goods sold?
The cost of goods sold is the sum of the beginning inventory and purchases minus the ending inventory.
The cost of goods sold can also be computed by subtracting the ending inventory from the cost of goods available for sale under the periodic inventory system.
Under the periodic inventory system, the cost of goods sold is determined at the end of the period and not during the inventory transactions.
ACCOUNT TITLE Adjustments Adjusted Trial Balance
Debit Credit Debit Credit
Merchandise Inventory 60,000 55,000 60,000
Estimated Returns Inventory 6,000 5,500 6,000
Supplies 4,700 3,300
Prepaid Insurance 1,600 3,800
Customer Refunds Payable 2,200 7,200
Income Summary 55,000 60,000 55,000 60,000
5,500 6,000 5,500 6,000
Sales 525,140
Sales Returns and Allowances 2,200 16,700
Beginning inventory = $60,500 ($55,000 + $5,500)
Ending inventory = $66,000 ($60,000 + $6,000)
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