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Financial Accounting

14th Edition
Carl Warren + 2 others
ISBN: 9781305088436

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BuyFindarrow_forward

Financial Accounting

14th Edition
Carl Warren + 2 others
ISBN: 9781305088436
Textbook Problem

The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 2016:

images

  1. a. Prepare the cost of merchandise sold section of the income statement for the year ended April 30, 2016, using the periodic inventory system.
  2. b. Determine the gross profit to be reported on the income statement for the year ended April 30, 2016.
  3. 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

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 Merchandise Sold Section
For The Year Ended April 30, 2016
ParticularsAmount($)Amount($)

b.

To determine

Calculate the gross profit to be reported on the income statement for the year ended April 30, 2016.

c.

To determine

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

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