Askew Company uses a periodic inventory system. The June 30, 2018, year-end trial balance for the company contained the following information: Account Debit Credit Merchandise inventory, 7/1/17 32,800 Sales 388,000 Sales returns 12,800 Purchases 248,000 Purchase discounts 6,800 Purchase returns 10,800 Freight-in 18,600 In addition, you determine that the June 30, 2018, inventory balance is $40,800. Required: 1. Calculate the cost of goods sold for the Askew Company for the year ending June 30, 2018. 2. Prepare the year-end adjusting entry to record cost of goods sold.

Answer and Explanation:

a. The computation of the cost of goods sold is shown below:

Beginning inventory $32,800

Add: Net purchase

Purchase $248,000

Less: Purchase discount - $6,800

Less: Purchase returns - $10,800

Add: Freight in $18,600

Total net purchased $249,000

Less: ending inventory - $40,800

Cost of goods sold $241,000

2. The year end adjusting entry is

Cost of goods sold Dr $241,000

Ending inventory Dr $40,800

Purchase discount Dr $6,800

Purchase returns Dr $10,800

To Beginning inventory $32,800

To Purchase $248,000

To freight in $18,600

(Being the cost of goods sold is recorded)