costnof merchandise sold and related items The following data were extracted fro

Question

costnof merchandise sold and related items

The following data were extracted from the accounting records of Harkins Company for the year ended April 30,2014:

Merchandise inventory May 1, 2013              $380,000

Merchandise inventory, April 30,2014              415,000

Purchases                                                         3,800,000

Purchases returns and allowances                    150,000

Purchases discounts                                             80,000

Sales                                                                   5,850,000

Freight in                                                                  16,600

Prepare the cost of merchandise sold section of the income statement for the year ended April 30,2014, using the periodic inventory system.

Cost of merchandise sold:

Net purchases

Cost of merchandise sold

B. Determine the gross profit to be reported on the income statement for the year ended April 30,2014. $ _______.

Explanation / Answer

Net purchases = Purchases - purchases returns and allowances - purchases discounts

= 3800000 - 150000 - 80000

= 3570000.

Cost of merchandise sold = Beginning inventory + net purchases + freight in - Ending inventory

= 380000 + 3570000 + 16600 - 415000

= 3551600.

B. Gross profit = Sales - Cost of goods sold

= 5850000 - 3551600 = 2298400.

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