Income statement

Income statement

Computation of cost of Goods sold

Step I: computation of beginning inventory

Computation of beginning inventory: this would be done with current cost of goods sold, by using the equation, given as under:

COGS= beg: inv + purchases - end: inv

Therefore, beg: inv= COGS- purchases + end: inv

Substituting values as under;

Beg: inv= 307,000-42000+34000

Thus, beginning inventory= $299,000

Step II:

Computation of COGS after adjusting purchases:

COGS= beg: inv + purchases - end: inv

Substituting values as under;

COGS= 299000-42500-34000

Therefore, COGS= $222,500

As computed, COGS after adjustment for purchases is $222,500

Preparation of the income Statement

Income statement is defined as “the financial statement that presents the revenues earned, as ...