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Cost of goods sold and related items The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 20Y8: Estimated returns of current year sales $ 11,600 Inventory, May 1, 20Y7 380,000 Inventory, April 30, 20Y8 415,000 Purchases 3,800,000 Purchases returns and allowances 150,000 Purchases discounts 80,000 Sales 5,850,000 Freight in 16,600 a. Prepare the “Cost of goods sold” section of the income statement for the year ended April 30, 20Y8, using the periodic inventory system. b. Determine the gross profit to be reported on the income statement for the year ended April 30, 20Y8. c. Would gross profit be different if the perpetual inventory system was used instead of the periodic inventory system?

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 5, Problem 41E
Textbook Problem
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Cost of goods sold and related items

The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 20Y8:

Estimated returns of current year sales $ 11,600
Inventory, May 1, 20Y7 380,000
Inventory, April 30, 20Y8 415,000
Purchases 3,800,000
Purchases returns and allowances 150,000
Purchases discounts 80,000
Sales 5,850,000
Freight in 16,600

a. Prepare the “Cost of goods sold” section of the income statement for the year ended April 30, 20Y8, using the periodic inventory system.

b. Determine the gross profit to be reported on the income statement for the year ended April 30, 20Y8.

c. Would gross profit be different if the perpetual inventory system was used instead of the periodic inventory system?

(a)

To determine

Calculate the cost of goods sold of Company H.

Explanation of Solution

Cost of Goods Sold:

Cost of goods sold indicates the costs involved for the inventory sold by the business in a specific period of time. Its mathematical representation is as below:

Cost of Goods Sold=Beginning Inventory+PurchasesEnding Inventory

Following table shows the calculation of cost of goods sold.

Company H
Income Statement
Cost of Goods Sold Section
For The Year Ended April 30, 20Y8
ParticularsAmount($)Amount($)
Merchandise inventory, May 1, 2017 380,000
Cost of merc

b.

To determine

Calculate the gross profit to be reported on the income statement for the year ended April 30, 20Y8.

c.

To determine

Explain whether the gross profit be different if the perpetual inventory system was used instead of the periodic inventory system.

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Chapter 5 Solutions

Financial And Managerial Accounting
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