Assume that Sandhill Co. uses a periodic inventory system and has these account balances: Purchases $420,800; Purchase Returns and Allowances $11,900; Purchase Discounts $8,100; and Freight-in $17,700. Sandhill Co. has beginning inventory of $58,100, ending inventory of $92,600, and net sales of $643,000. Determine the amounts to be reported for cost of goods sold and gross profit.

Question

Carmelo Hayden

Business

31 May, 09:06

Assume that Sandhill Co. uses a periodic inventory system and has these account balances: Purchases $420,800; Purchase Returns and Allowances $11,900; Purchase Discounts $8,100; and Freight-in $17,700. Sandhill Co. has beginning inventory of $58,100, ending inventory of $92,600, and net sales of $643,000. Determine the amounts to be reported for cost of goods sold and gross profit.

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Wilson Bright · Answer 1

Cost of goods Sold = $384,000

Gross Profit = $259,000

Explanation:

Cost of goods sold = Opening Inventory + Net Purchase - Closing Inventory

Opening Inventory = $58,100 Closing Inventory = $92,600

Net Purchases = Purchase - Purchase Return - Discounts + Freight in

Freight in forms part of cost of purchase because without this expense inventory cannot be bought in.

Net Purchases = $420,800 - $11,900 - $8,100 + $17,700 = $418,500

Cost of goods Sold = $58,100 + $418,500 - $92,600 = $384,000

Gross Profit = Sales - Cost of Goods Sold

= $643,000 - $384,000 = $259,000.