The following data were extracted from the accounting records of Harkins Company
ID: 2559274 • Letter: T
Question
The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 2018:
Estimated returns of current year sales
$ 11,600
Inventory, May 1, 2017
380,000
Inventory, April 30, 2018
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, 2018, using the periodic inventory system. Be sure to complete the statement heading. Refer to the information given in the exercise and to the list of Accounts, Labels, and Amount Descriptions provided for the exact wording of the answer choices for text entries. Colons (:) will fill in where needed. Negative amount should be indicated by the minus sign.
B.
Determine the gross profit to be reported on the income statement for the year ended April 30, 2018.
C.
Would gross profit be different if the perpetual inventory system was used instead of the periodic inventory system?
Accounts
Accounts payableCustomer refunds payableDelivery expenseFreight inPurchasesPurchases discountsPurchases returns and allowancesSalesSupplies expenseLabelsApril 30, 2018For the Year Ended April 30, 2018Operating expensesCost of merchandise purchasedAmount DescriptionsCost of goods soldCost of goods sold before estimated returnsEstimated returnsExpensesGross profitInventory, April 30, 2018Inventory, May 1, 2017Inventory available for saleNet incomeNet purchasesRevenuesTotal cost of merchandise purchased
A. Prepare the cost of goods sold section of the income statement for the year ended April 30, 2018, using the periodic inventory system. Be sure to complete the statement heading. Refer to the information given in the exercise and to the list of Accounts, Labels, and Amount Descriptions provided for the exact wording of the answer choices for text entries. Colons (:) will fill in where needed. Negative amount should be indicated by the minus sign.
Harkins Company
Schedule of Cost of Goods Sold
1
2
3
4
5
6
7
8
9
10
11
12
B. Determine the gross profit to be reported on the income statement for the year ended April 30, 2018.
C. Would gross profit be different if the perpetual inventory system was used instead of the periodic inventory system?
Estimated returns of current year sales
$ 11,600
Inventory, May 1, 2017
380,000
Inventory, April 30, 2018
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, 2018, using the periodic inventory system. Be sure to complete the statement heading. Refer to the information given in the exercise and to the list of Accounts, Labels, and Amount Descriptions provided for the exact wording of the answer choices for text entries. Colons (:) will fill in where needed. Negative amount should be indicated by the minus sign.
B.
Determine the gross profit to be reported on the income statement for the year ended April 30, 2018.
C.
Would gross profit be different if the perpetual inventory system was used instead of the periodic inventory system?
Explanation / Answer
Answer:
1
Harkins Company
Schedule of cost of goods sold
For the Year Ended April 30, 2018
Cost of merchandise sold:
Merchandise inventory, May 1, 2017
380,000
Purchases
3,800,000
Less: Purchases returns and allowances
150,000
Less: Purchases discounts
80,000
230,000
Net purchases
3,570,000
Add freight in
16,600
Cost of merchandise purchased
3,586,600
Merchandise available for sale
3,966,600
Less merchandise inventory, April 30, 2018
415,000
Cost of merchandise sold
3,551,600
_______________________________________________
2
Sales
5,850,000
Less: estimated sales return
11600
Net sales
5,861,600
Less: cost of goods sold
3,551,600
Gross profit
2,310,000
_______________________________________________
3
Would gross profit be different if the perpetual inventory system was used instead of the periodic inventory system?
Answer: NO
Harkins Company
Schedule of cost of goods sold
For the Year Ended April 30, 2018
Cost of merchandise sold:
Merchandise inventory, May 1, 2017
380,000
Purchases
3,800,000
Less: Purchases returns and allowances
150,000
Less: Purchases discounts
80,000
230,000
Net purchases
3,570,000
Add freight in
16,600
Cost of merchandise purchased
3,586,600
Merchandise available for sale
3,966,600
Less merchandise inventory, April 30, 2018
415,000
Cost of merchandise sold
3,551,600
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