1) Inventory at the beginning of the year cost $13,400. During the year, the company purchased...


1) Inventory at the beginning of the year cost $13,400. During the year, the company purchased (on account) inventory costing $84,000. Inventory that had cost $80,000 was sold on account for $95,000. At the end of the year, inventory was counted and its cost was determined to be $17,400.

a) Calculate the cost of goods sold.

b) What was the dollar amount of Gross Profit?

c) Prepare journal entries to record these transactions, assuming a perpetual inventory system is used.

2) Assume Anderson's General Store bought, on credit, a truckload of merchandise from American Wholesaling costing $23,000. The company was charged $650 in transportation cost by National Trucking, immediately returned goods to American Wholesaling costing $1,200, and then took advantage of American Wholesaling's 2/10, n/30 purchase discount.

Prepare journal entries to record the inventory transactions, assuming Anderson's uses a perpetual inventory system.

Gross Profit

Gross Profit is a line-item in the Income Statement report which aims to show the revenues earned by a business after deducting its Cost of Goods Sold for the year against its Net Sales, meaning Sales Revenue less Sales Returns & Allowances and Sales Discounts. Additionally, a company's Gross Profit can be presented ratio to show to the investors how efficient the management is when it comes to managing its resources during the manufacturing process of its goods.

Answer and Explanation: 1

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Problem 1

Requirement A

Beg. Inventory $13,400
add: Purchases 84,000
Total 97,400
less: Ending Inventory (17,400)
Cost of Goods Sold...

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Learn more about this topic:

What Is Gross Profit? - Definition, Formula & Calculation


Chapter 9 / Lesson 7

Understand the meaning of gross profit in accounting. Discover the formula for calculating gross profit and explore some examples of gross profit calculation.

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