Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory of $15,000 at the beginning of the year. An end of the year audit revealed that the company had DVD inventory of $10,000. What amount would be reported as cost of goods sold in the income statement for the current year.

The cost of goods sold is determined by deducting the closing inventory balance from the opening inventory balance and the inventory purchased during the current period. Audio Corporation had $15,000 as the opening balance of its DVDs inventory account, $20,000 of inventory was purchased during the year and at year end, the DVD inventory was less $25,000 worth of DVDs.

The cost of goods sold is therefore calculated as follows:

Opening balance: $15,000

Purchases: $20,000

Finished goods: ($25,000)

Closing balance: $10,000

$25,000 would be reported as cost of goods sold, assuming DVDs are the only goods that Audio Corporation sells.