A company started the year with $10,000 of inventory. Purchases for resale during the year were$20,000. Inventory on December 31 is $5,000. What's the cost of goods sold?

Step 1: Define the Problem

Identify the key components of the question that need to be addressed:

• Beginning Inventory: $10,000
• Purchases during the year: $20,000
• Ending Inventory: $5,000
• We need to find the Cost of Goods Sold (COGS).

Step 2: Break Down the Problem

Divide the problem into smaller, manageable parts:

1. Calculate the total cost of goods available for sale.
2. Use the formula for COGS.

Step 3: Apply Relevant Concepts

Use the formula for Cost of Goods Sold: $\text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory}$

Step 4: Analysis, Verify and Summarize

1. Calculate the total cost of goods available for sale: $\text{Total Cost of Goods Available} = \$10,000 + \$20,000 = \$30,000$
2. Calculate COGS: $\text{COGS} = \$30,000 - \$5,000 = \$25,000$

Final Answer

The Cost of Goods Sold (COGS) for the year is $25,000.