Smith Company purchases $60,000 of inventory during the period and sells $18,000 of it for $30,000. Beginning of the period inventory was $3,000. What is the company’s inventory balance to be reported on its balance sheet at year end?

Question

Smith Company purchases $60,000 of inventory during the period and sells $18,000 of it for $30,000.  Beginning of the period inventory was $3,000.  What is the company’s inventory balance to be reported on its balance sheet at year end?

BlackTom AI · Accepted Answer

To determine the ending inventory, first identify what is available for sale and what has been sold during the period.
- The company starts with beginning inventory of $3,000.
- It purchases $60,000 of additional inventory during the period, so goods available for sale = 3,000 + 60,000 = 63,000.
- It sells inventory with a cost of $18,000 (the statement says it sells $18,000 worth of inventory, implying cost of goods sold = 18,000).

Next, compute ending inventory by subtracting COGS from goods available for sale:
- Ending inventory = 63,000 − 18,000 = 45,000.

Now evaluate each answer option:
- Option "$45,000": This reflects ending inventory correctly calculated as above, so it is the right result.
- Option "$2,000": This would imply a much smaller level of remaining inventory, which would require either a different COGS or a different starting point for goods available for sale; neither is supported by the data.
- Option "$18,000": This could be misinterpreted as the COGS, not the ending inventory. It represents the cost of goods sold, not the ending balance.
- Option "$3,000": This matches the beginning inventory, not the ending balance. Ending inventory would need to account for purchases and COGS, so this value is inconsistent with the period activity described.

In summary, by combining beginning inventory with purchases to get total available for sale and then subtracting COGS, the correct ending inventory is $45,000. The other figures correspond to either the starting point, the cost of goods sold, or an incorrect interpretation of the sales activity.

Smith Company purchases $60,000 of inventory during the period and sells $18,000 of it for $30,000. Beginning of the period inventory was $3,000. What is the company’s inventory balance to be reported on its balance sheet at year end?

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