BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

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, 2019:

Increase in estimated returns inventory $ 11,600
Merchandise inventory, May 1, 2018 380,000
Merchandise inventory, April 30, 2019 415,000
Purchases 3,800,000
Purchases returns and allowances 150,000
Purchases discounts 80,000
Sales 5,850,000
Freight in 16,600
  1. a. Prepare the cost of merchandise sold section of the income statement for the year ended April 30, 2019, using the periodic inventory system.
  2. b. Determine the gross profit to be reported on the income statement for the year ended April 30, 2019.
  3. 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, 2019
Particulars Amount($) Amount($)
Merchandise inventory, May 1, 2018   380,000
Cost of merchandise purchased:    
   Purchases 3,800,000  
   Less: Purchase returns and allowances (150,000)  

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, 2019.

c.

To determine

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

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What is a loan amortization schedule, and what are some ways these schedules are used?

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

Suppose a firm estimates its WACC to be 10%. Should the WACC be used to evaluate all of its potential projects,...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)