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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

CALCULATION OF COST OF GOODS SOLD: PERIODIC INVENTORY SYSTEM WITH SALES RETURNS AND ALLOWANCES Use the same information as provided in Exercise 14-3B, but assume the business makes estimates for sales returns and allowances at year end. The balances for estimated returns inventory are provided below. Prepare the cost of goods sold section of the income statement.

Beginning estimated returns inventory $2,600
Ending estimated returns inventory 3,500

To determine

Prepare the cost of goods sold section for Company H.

Explanation

Periodic inventory system:

The method or system of recording the transactions related to inventory occasionally or periodically are referred to as periodic inventory system.

Cost of goods sold:

Cost of goods sold is the total of all the manufacturing expenses incurred by a company to sell the goods during the given period.

The beginning inventory is added to purchases for calculating cost of goods that is available for sale. The ending inventory is deducted from cost of goods that is available for sale to calculate cost of goods sold.

Prepare the cost of goods sold:

Cost of goods sold: Amount Amount Amount Amount
Merchandise inventory beginning $29,000
Estimated beginning returns inventory$2,600$31,600

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