How to Calculate Ending Inventory: Real Business Scenario – calculate | ending inventory | business
How to Calculate Ending Inventory: Real Business Scenario
You are the accountant at ABC Parts Ltd, a company that makes bolts nuts used in various industrial processes. The company usually determines its ending inventory by performing an inventory count at the end of every period. On December 31, 2019, the day of the inventory count, there is a gas leak that breaks out in the warehouse. None of the inventory was damaged, however, for safety reasons, you or any employees are not allowed in the warehouse. So the annual inventory count will have to be delayed. The company is in a hurry to produce financial statements and needs some preliminary numbers. Inventory is an important number because management is always worried about having too much or too little on hand. You, therefore, turn to your computer to pull up some financial information that can be used to compute ending inventory.
Here are the numbers that you found:
Inventory balance at December 31, 2018 = 120,350
Inventory balance at December 31, 2019 = unknown
Purchases made during the year = 40,000
Purchase returns = 2,160
Cost of goods sold = 65,015