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Level 2
January 15, 2020
Question

Additional Inventory without Sales

  • January 15, 2020
  • 2 replies
  • 0 views

Hello,

I started purchasing audio-visual equipment for resale in2014.  For the sake of simplicity, $10,000 of end of year inventory in 2014. No sales occurred  in 2015.   I added $5,000 in inventory with no sales.  When TTx shows the "Inventory" and "Cost of Goods Sold" on the "Business Income and Expenses" summary overview list, it shows $10,000 for 2014 and "0" for 2015. In the "Report the Value of your Inventory, TTx shows $10,000 in the beginning of 2015 and I entered$15,000 for the EOY for 2015. In the "Tell us the Cost of Your Goods" window, TTx shows $10,000 for 2014 Cost of Purchases.  I typed in $5,000 for 2015.

the Buss. Income & Expenses Summary" shows "0" no matter if I type in "0" or "$5,000" in this field.

What am I doing wrong?

2 replies

Level 15
January 15, 2020

I suspect that it is just showing your actual deduction on the tax return, which is $0.

Merely purchasing Inventory does not result in a tax deduction.  The deduction happens when the product is sold (and therefore your inventory decreases).

Floyd77Author
Level 2
January 15, 2020

Thank you.  I spoke with a TTx person who believed the program had a glitch since the correct numbers were on the Sched C form.  You could be correct however.

Level 2
January 15, 2020

I think, based on your description, tis would be the error: "In the "Tell us the Cost of Your Goods" window, TTx shows $10,000 for 2014 Cost of Purchases. I typed in $5,000 for 2015."

 

Purchase = what you spent to get new inventory as an Asset. Not as expense.

 

Cost, meaning your purchase price, of Goods Sold, and Sold means Gone. You stated that 2015 had no sales, so COGS is $0 for 2015.

$10,000 inventory purchased and still on hand for the end of 2014 + $5,000 new product on hand = total of $15,000 inventory asset on hand. Nothing sold = $0 COGS.

Cost of Purchases while on hand = inventory Asset value. It's not a cost of goods Sold, until they get Sold.

 

Then:

Gross Income from sales minus COGS = profit for what you sold. Example:

$15,000 on hand value

sell one third of it, for 100% markup

 

That means $10,000 value still on hand <== asset

and;

$10,000 gross sales income <== $5,000 cost of products sold at 100% markup

minus $5,000 Cost for the goods sold and no longer on hand

= you made $5,000 profit, which was the plan, since you used 100% markup

 

And this is Fine: "the Buss. Income & Expenses Summary" shows "0" no matter if I type in "0" or "$5,000" in this field."

 

Having new inventory or not, makes no difference to Expense, because you had no sales.

Floyd77Author
Level 2
January 16, 2020

Qbteachmt,

Thank you for your response, just read and re-read it.  Missed it earlier. Apparently I misunderstood what T.Tx 2015 was representing in the "0" answer....

Very insightful explanation.