Question

Using the following data taken from Hsu’s Imports Inc. which uses a periodic inventory system to answer this question. Merchandise inventory, April 1 $193,250 Merchandise inventory, March 31 180,100 Purchases 1,079,600 Purchases returns and allowances 51,200 Purchases discounts 18,500 Sales 1,860,000 Freight-in 19,250 Determine the gross profit to be reported on the income statement for the year ended March 31.

Answer 1

Answer:

$799,200

Explanation:

With the provided information, we have,

Opening inventory = $193,250

Closing inventory = $180,100

Purchases = $1,079,600

Purchase return = $51,200

Purchase discounts = $18,500

Sales = $1,860,000

Freight in = $19,250

While calculating gross profit all of the above except purchase discounts as will not be considered, because that will be deducted from gross profit to get net income.

Therefore, gross profit shall be:

Sales + Closing Stock - Opening Stock - (Purchases - Purchase returns) - Freight in

= $1,860,000 + $180,100 - $193,250 - ($1,079,600 - $51,200) - $19,250

= $799,200