Chapter 5, Problem 41E

Cost of goods sold and related items

The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 20Y8:

Estimated returns of current year sales	$ 11,600
Inventory, May 1, 20Y7	380,000
Inventory, April 30, 20Y8	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, 20Y8, using the periodic inventory system.

b. Determine the gross profit to be reported on the income statement for the year ended April 30, 20Y8.

c. Would gross profit be different if the perpetual inventory system was used instead of the periodic inventory system?