I don't understand the logic in Part III Cost of Goods Sold on Schedule C. I know that Cost of Goods Sold (COGS) is what I paid/materials used for the inventory I sold during the tax year. I make scarves and my raw material is yarn.
Line 35&40: my opening inventory was $1800, using a raw materials cost basis.
Line 41: my closing inventory was $3200. (I made a lot that I didn't sell yet.)
I had sales of $2500 with a cost basis of $1400.
So I calculate $3200 - $1800 = $1400 COGS. This matches what I thought.
HOWEVER in TurboTax, line 42 subtracts line 41 from line 40 so the math is $1800-$3200 = negative number = $0 COGS. What am I doing wrong??
Also can anyone explain what Line 38 Materials & Supplies means? I spent 30 minutes with an IRS agent and he could not find any documentation on the meaning of the line. (How is that possible!)
