Reporting Book Inventory

[taxedtoruin]

For the last two years I've simply been plugging in numbers to equal the inventory of my books.  Since I have more time this year, I'd like to properly input my sales and inventory but am having considerable trouble achieving a balance.  Here are my inputs:

I have an inventory of 1,004 books that cost $3012 to produce ($3 production cost/book) years ago.  So I'm using $3012 as my Beginning of 2019 Inventory.

Last year, 2019,  I sold 29 books and received $373 in total sales.

I'm assuming my End of 2019 inventory input should be $2925.

Is my Cost of Purchases suppose to be $87 (29 books x $3/book)?

What should be my Materials and Supplies input?

Can anyone help me?  Shamefully, I've just been plugging numbers into the Materials and Supplies box to get what I think my end of year inventory should be (3012-87 = $2925).

[tagteam · Accepted solution]

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@taxedtoruin wrote:

....I've just been plugging numbers into the Materials and Supplies box to get what I think my end of year inventory should be (3012-87 = $2925).

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The Cost of Goods Sold formula for retail businesses, generally, is:

Beginning Inventory (at the beginning of the tax year) Plus Purchases Minus Ending Inventory (at the end of the tax year). In the instance you cited, that would be $3012 (beginning inventory) less $2925 (ending inventory) which would equal a CGS of $87 (since you apparently had no purchases during the tax year).

In future years, you can enter the costs of materials and supplies used to produce your books or, alternatively, enter those costs as purchases.

Note that, if you are a small business taxpayer, you are not required to keep an inventory for federal income tax purposes.

See https://www.irs.gov/instructions/i1040sc#idm140229396703984

[taxedtoruin]

Thanks, tagteam, for your rapid response.  Your answer seems reasoned but it doesn't actually solve my problem because I don't know how to input the info into the appropriate box.  Moreover, I am a small business taxpayer and my inventory simply represents the purchase price of the existing books--which I am regarding as materials and supplies.  So perhaps this is where my confusion is.  After inputting $87 as Cost of Purchases (29 books x $3), if in the Materials and Supplies input box I enter only $87, my taxes due jumps up nearly $600!  (My book "sales" for the year were less than $400.)  If I enter $0 into the Materials and Supplies box, they jump up an additional $20.  On the other hand, the higher the number I plug into the Materials and Supplies box (say, 5000) the less my due taxes are.   Even though I am working with less than five inputs, I'm doing something fundamentally incorrect.  And if I declare No Inventory, turbotax skips further inputs and reflects the last entry made into Materials and Supplies before the No Inventory declaration.   I'm flummoxed.  

[tagteam]

@taxedtoruin If you simply enter your beginning inventory and then your ending inventory, and nothing else, the program will calculate the correct CGS (cost of goods sold) figure for you, which should be $87.

[taxedtoruin]

I'm using the Home & Business version of turbotax.  After I enter the Beginning of 2019 inventory number and End of 2019 ending number, it still asks me what my Cost of Purchases is followed by the other boxes.  It does not routinely calculate for me.  All of the following input boxes are asking for input:

Cost of Purchases

Purchases Withdrawn for Personal Use

Labor Costs

Materials and Supplies

Other Costs to Prepare for Sales

(I understand if you have no more time to deal with my problem.)