Adjusting purchases for returns and personal use in cost of sales formula

Steps:

• Compute net purchases: $95,000 -$3,000 (returns outwards) - $5,000 (personal withdrawals) =$87,000.
• Closing inventory exceeds opening inventory by $1,000.
• Apply cost of sales formula: opening inventory + net purchases - closing inventory.
• Opening inventory cancels out: $87,000 -$1,000 = $86,000.

Why B is correct:

• Matches the standard formula where personal inventory withdrawals reduce net purchases, and cost of sales adjusts for the net inventory increase.

Why the others are wrong:

• A: Calculates net purchases at $87,000 but omits subtracting the$1,000 inventory increase.
• C: Likely deducts returns and inventory change from gross purchases without accounting for withdrawals ($95,000 -$3,000 - $3,000?).
• D: Adds the 95,000 - 5,000 + $100?).

Final answer: B