Answer:
33 Method(s) used to value closing inventory: Cost
34 Was there any change in determining quantities, costs, or valuations between opening and closing inventory?
If "Yes," attach explanation: No
35 Inventory at beginning of year. If different from last year's closing inventory, attach explanation: $81,160
36 Purchases less cost of items withdrawn for personal use: $795,368
37 Cost of labor. Do not include any amounts paid to yourself:
38 Materials and supplies:
39 Other costs:
40 Add lines 35 through 39: $876,528
41 Inventory at end of year:
$97,392
42 Cost of goods sold. Subtract line 41 from line 40. Enter the result here and on line 4: $779,136
Note: The cost of inventory a taxpayer owns has a significant impact on the taxable income of the taxpayer. The deduction for the cost of goods sold of a retail business is a direct function of the amount of the beginning and ending inventories.
Note (2): The calculation of cost of goods sold is reported in Part III (Figure 3.5) of Schedule C. In Part III lines 33 and 34, taxpayers must answer questions about the methods used to calculate inventory. Cost of goods sold is equal to the beginning inventory (line 35) plus purchases (line 36), labor (line 37), materials and supplies (line 38), and other costs (line 39) less ending inventory (line 41).
Valuation of inventories used in calculating the cost of goods sold is necessary to reflect clearly the income of the taxpayer. To calculate cost of goods sold, the taxpayers must value the beginning and ending inventories of the business as well as any purchases made throughout the year.
Note that purchases must be reduced for the cost of items withdrawn for personal use.
Once the inventory components are valued, the cost of goods sold is calculated as shown below:
Beginning Inventory $
Add: Purchases $
Equals: Costs of Goods Available for Sale $
Less: Ending Inventory ($)
Equals: Cost of Goods Sold $