Chapter 5, Problem 5.35EX

Cost of merchandise sold and related items

The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 2016:

Merchandise inventory. May 1, 2015	$ 380,000
Merchandise inventory, April 30,2016	415,000
Purchases	3,800,000
Purchases returns and allowances	150,000
Purchases discounts	80,000
Sales	5,850,000
Freight in	16,600

1. a. Prepare the cost of merchandise sold section of the income statement for the year ended April 30, 2016, using the periodic inventory system.
2. b. Determine the gross profit to be reported on the income statement for the year ended April 30, 2016.
3. c. Would gross profit be different if the perpetual inventory system was used instead of the periodic inventory' system?