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Accounting (Text Only)
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.
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:
To Calculate: The cost of goods sold of Company H.
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 | Â | 380,000 |
| Cost of merchandise purchased: | Â | Â |
| Â Â Purchases | 3,800,000 | Â |
| �... | ||
b.
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:
To Calculate: The gross profit to be reported on the income statement for the year ended April 30, 2016.
c.
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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