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21 July, 07:18

The trial balance of Mendez Company at the end of its fiscal year, August 31, 2022, includes these accounts: Beginning Inventory $18,700; Purchases $154,000; Sales Revenue $190,000; Freight-In $8,000; Sales Returns and Allowances $3,000; Freight-Out $1,000; and Purchase Returns and Allowances $5,000. The ending inventory is $21,000.

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  1. 21 July, 07:40
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    Gross Profit: 186,000 - 154,700 = 31,300

    COGS: 154,700

    Net Sales: 186,000

    Explanation:

    Beginning Inventory 18,700

    Purchases 154,000

    Freight-In 8,000

    Purchase Returns and Allowances (5,000)

    Ending inventory (21,000)

    COGS 154,700

    Sales Revenue 190,000

    Sales Returns and Allowances (3,000)

    Freight-Out (1,000)

    Net Sales: 186,000

    Gross Profit: 186,000 - 154,700 = 31,300

    Notes: the freight-in are cost required to get the inventory ready for sale so arec capitalized through inventory

    the freight-out is part of the effort to sale, thus decrease the sales figure.
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