Question

Use the information provided below, for Snow Plumbing Services, which uses the
periodic inventory system, to answer question 7:
R
Inventory (1 July 20.7)……………………….................................. 150 000
Cash purchases……………………………………………………....
Credit purchases……………………………………………………...
Purchases returns…………………………………………………....
15 000
6 000
2 000
Freight inwards………………………………………………………..
Freight outwards………………………………………………………
Settlement discount received………………………………………..
Settlement discount granted…………………………………………
1 200
1 800
1 700
2 500
Inventory (31 July 20.8)……………………. 120 000
Additional information:
The owner of Snow Plumbing Services donated taps and basins to the value of R1 000 to the
local crèche on 16 June 20.7. No entries regarding this transaction was made in the accounting
records of Snow Plumbing Services, yet.
34
ASSIGNMENT 01 (continued)
7. The cost of sales is …
R
(1) 47 500
(2) 17 300
(3) 10 300
(4) 19 000
(5) 18 000

Answer 1

The cost of sales is (1) 47 500

The cost of sales = Inventory (1 July 20.7) + Cash purchases + Credit purchases - Purchases returns + Freight inwards - Settlement discount received - Value of taps and basins to the local crèche - Inventory (31 July 20.8)

The cost of sales = 150000 + 15000 + 6000 – 2000 + 1200 – 1700 – 1000 – 120000 = 47500