The following data were available from Mith Co.’s records on December 31, year 2:

 The following data were available from Mith Co.’s records on December 31, year 2:



Finished goods inventory, 1/1/Y2    $120,000
Finished goods inventory, 12/31/Y2    110,000
Cost of goods manufactured    520,000
Loss on sale of plant equipment    50,000


The cost of goods sold for year 2 was
$510,000
$520,000
$530,000
$580,000

Answer

$530,000

 You Answered Correctly!
This answer is correct. For a manufacturing company, cost of goods sold is computed as follows:



Finished goods inv., 1/1/Y2    $120,000
Cost of goods manufactured    520,000
Cost of goods available for sales    640,000
Less finished goods inv., 12/31/Y2    110,000
Cost of goods sold    $530,000


Note that the above computation is very similar to the computation of cost of goods sold for a merchandising firm.  For a merchandising firm, merchandise inventory is used instead of finished goods inventory and cost of goods purchased is used instead of cost of goods manufactured.  In either case, a loss on sale of equipment ($50,000) would not affect the computation.