Dear team , Please note while solving the Income statement , I found problem in cost of good sold. In the question it is clearly mentioned that , Before the directors became aware of this investment opportunity they prepared the following forecast financial statements: where cost of good sold is 12000 in the question I million has been invested in raw material in 2 month , so as per my calculation cost of good sold fig in 000 cost of good sold 12000 purchase 1000 Depreciation 600 ----------------- 13600 -------------------- but in solution the cost of good sold is 12600 , why 1000 purchase of raw material not taken into account . please clarify regards Suresh sharma
The additional raw materials purchased will increase closing stock so have no effect on the cost of goods sold (ie purchases and closing stock both increase by 1,000 and thus cancel out).
