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	$10,150
Inventory, May 1, 2017	394,150
Inventory, April 30, 2018	404,550
Purchases	3,957,250
Purchases returns and allowances	155,850
Purchases discounts	78,200
Sales	5,802,300
Freight in	16,350

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. The 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?

Answer 1

Answer: Requirement A: Cost of Goods sold: Amount($) Amount($) Amount(s) Inventory, May 1, 2017 394150 Purchases 3957250 Less: Purchases returns and allowances | 155850 Purchases discounts 78200 234050 Net purchases 3723200 Add: Freight In 16350 Cost of Inventory purchased 3739550 Inventory available for sale 4133700 Less: Inventory, April 30, 2018 404550 Cost of goods sold 3729150 Requirement B: Harkins Company Income statement For the year ended April 30, 2018 Particulars Amount() Sales 5802300 Less: Sales Returns 10150 Net Sales 5792150 Less: Cost of goods Sold 3729150 Gross Profit 2063000 Requirement C: No. Gross profit would be the same if the perpetual inventory system was used.