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Please explain why we have to subtract purchase of goods(11750) from total inventory?
The inventory value for the financial statements of Global Inc for the year ended 30 June 20X3 was based on a inventory count on 7 July 20X3, which gave a total inventory value of $950,000.
Between 30 June and 7 July 20X6, the following transactions took place.
$
Purchase of goods 11,750
Sale of goods (mark up on cost at 15%) 14,950
Goods returned by Global Inc to supplier 1,500
What figure should be included in the financial statements for inventories at 30 June 20X3?
A $952,750
B $949,750
C $926,750
D $958,950It is because we are trying to work backwards to find out what the inventory was on 30 June.
Purchases after that date will have increased the inventory. So since we are told what the inventory was on 7 July, we need to subtract the purchases in order to find out what it was on 30 June.
Thanks John Moffat, it seems there was needed to pay attention to dates of transactions.thanks again.
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