Any help is appreciated!
Sole-proprietor with a DBA here, I'm struggling to confidently calculate COG, mainly worried about my EOY inventory value coming out so it matches 2023 BOY. Here's some background info into the situation:
- Jan 2022 started selling online with the intention of making a profit as a business.
- 80% of inventory sold in 2022 were personal items purchased prior to 2022. (I understand how to value those items using LCM.)
- The other 20% of inventory sold were items purchased in 2022 for direct reselling purposes.
- Ending inventory listed online and available for sale (Dec 2022) consists of both personal items, $3,000 and items purchased for the business, $6,000.
So.. my BOY inventory is 0. Because this is first year of business, it must be zero.
I know my COGS, $5,000. I guess where I'm struggling is the "purchases" amount and what should be left in EOY.
During 2022, I purchased (with receipts) $7,000 of inventory to resell.
Of the $5,000 COGS only $1,000 of that was actually purchased in 2022 for business purposes the other $4,000 would be the value (LCM) of the personal items sold.
Finally I'm to my point I think, thanks for hanging in there. 🙂
Is my purchases amount going to be $11,000? The $7,000 I actually bought plus the $4,000 COG from personal items? Its the only way I get close to the EOY $6,000 that I actually had on hand that was purchased inventory.
OR should my EOY consist of all inventory listed online & available for sale (Dec 31 2022) which would be $9,000 ($6,000 left from 2022 purchases + $3,000 personal items LCM)?? But I don't even know how I would get to that number of EOY $9k unless I included the $3,000 of EOY personal items in with the purchases??
BOY $0
Purch. + $11,000 OR $14,000
COGS - $5,000
EOY $6,000 OR $9,000
I think EOY $6,000 is right & I shouldn't include personal items in the inventory value until they actually sell. It just seems wrong to have it in both purchases & COGS.
Tell me I'm wrong or right. Just help me! I think I'm just getting myself more confused. Thanks for your time!
