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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Appendix

Cost of merchandise sold and related items

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

Merchandise inventory, May 1, 2015 $ 380,000
Merchandise inventory, April 30, 2016 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 merchandise sold section of the income statement for the year ended April 30, 2016, using the periodic inventory system.

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

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

a.

To determine

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

To Calculate: The cost of goods sold of Company H.

Explanation

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
Particulars Amount($) Amount($)
Merchandise inventory, May 1, 2015   380,000
Cost of merchandise purchased:    
   Purchases 3,800,000  
�...

b.

To determine

Gross profit represents the revenue after the deduction of cost of goods sold from the net sales of a business. Its mathematical representation is as below:

Gross profit=SalesCost of merchandise sold

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

c.

To determine

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

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