Shown here are annual financial data at December 31, 2015, taken from two different companies.

	Music World Retail	Wave-Board Manufacturing
Merchandise	$200,000
Finished Goods		$500,000
Cost of Purchases	300,000
Cost of Goods Manufactured		875,000
Ending Inventory
Merchandise	175,000
Finished Goods		225,000

Required

1. Compute the cost of goods sold section of the income statement at December 31, 2015, for each company. Include the proper title and format in the solution.

2. Write a half-page memorandum to your instructor (a) identifying the inventory accounts and (b) describing where each is reported on the income statement and balance sheet for both companies.