Use the following information below to answer the question Ojo bought a bicycle for #20,000, and repaired it at a cost of #5,000. He then sold the bicycle f...

The cost of goods sold represents the total amount spent to get an item ready for sale, which includes both the price paid to acquire it and any further cost needed to make it saleable, such as repair or reconditioning.

1. Purchase price of the bicycle: \( \text{₦}20{,}000 \)
2. Repair cost: \( \text{₦}5{,}000 \)
3. Cost of goods sold: \( \text{₦}20{,}000 + \text{₦}5{,}000 = \text{₦}25{,}000 \)

Because the bicycle could not have been resold profitably without the repair, the repair cost is treated as part of what it took to bring the goods to a saleable condition, so it is added to the purchase price to give a total cost of goods sold of \( \text{₦}25{,}000 \).

Taking only the purchase price of \( \text{₦}20{,}000 \) ignores the repair cost that was necessary before sale, while using the selling price of \( \text{₦}30{,}000 \) confuses revenue with cost; these two figures answer different questions from the one asked here.

Whenever a question describes an item bought and then improved or repaired before sale, add the improvement cost to the purchase price to find the true cost of goods sold.