McMillan Company uses the periodic inventory system. It has compiled the following information in order to...

McMillan Company uses the periodic inventory system. It has compiled the following information in order to prepare the financial statements at December 31, 2014:

Gross sales during 2014	$2,000,000
Sales returns and allowances during 2014	50,000
Begining inventory, January 1, 2014	100,000
Ending inventory, December 31, 2014	120,000
Purchases during 2014	750,000

Required:

Calculate each of the following:

A. Cost of goods available for sale

B. Cost of goods sold

C. Gross profit

Solutions

Expert Solution

A. Cost of goods available for sale = Beginning inventory + Purchases
= $100,000 + $750,000 = $850,000

B. Cost of goods sold = Cost of goods available for sale – Ending Inventory
= $850,000 - $120,000 = $730,000

C. Gross profit = Net sales - Cost of goods sold
= $2,000,000 – $50,000 - $730,000 = $1,220,000

ekkarill92 answered 1 year ago

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