Accounting Problem 18-01

Problem 18-01
Class:

Part 1: Cost of Goods Sold for a Merchandising Business
PINNACLE RETAIL
Partial Income Statement
For Year Ended December 31, XXX2
Cost of goods sold:
Merchandise inventory, December 31, XXX1
Merchandise purchases
Goods available for sale
Less merchandise inventory, December 31, XXX2
Cost of goods sold
Part 2: Cost of Goods Sold for a Manufacturing Business
SLOPE BOARD MANUFACTURING
Partial Income Statement
For Year Ended December 31, XXX2
Cost of goods sold:
Finished goods inventory, December 31, XXX1
Cost of goods manufactured
Goods available for sale
Finished goods inventory, December 31, XXX2
Cost of goods sold

Part 3: Explain the difference between calculating cost of goods sold for a merchandising and a manufacturing business. Indicate what inventory accounts are used for each and on what financial statement and in which section these inventory accounts would be included.

Given Data P18-01:
Financial data at December 31, 2005:
Pinnacle Slope Board
Retail
Manufacturing
Beginning inventory:
Merchandise
Finished goods
Cost of purchases
Cost of goods manufactured
Ending inventory
Merchandise
Finished goods

Check figure:
(1) Slope Board's cost of goods sold

$150,000
$300,000
250,000
586,000
100,000
200,000

$686,000

Instructions:
Part 1: Complete the partial income statement for Pinnacle, a merchandising business.
Part 2: Complete the partial income statement for Slope, a manufacturing business.
Part 3: Explain the difference between calculating cost of goods sold for a merchandising and a manufacturing business.
Indicate what inventory accounts are used for each and on what financial statement and in which section these inventory accounts would be included.