Assume that Tracy Company uses a periodic inventory system and has these account balances: Purchases $440,600; Purchase Returns and Allowances $11,980; Purchase Discounts $8,247; and Freight-in $16,900. Tracy Company has beginning inventory of $57,710, ending inventory of $88,110, and net sales of $649,500.

Determine the amounts to be reported for cost of goods sold and gross profit.

Cost of goods sold:

Gross profit:

(a) $406,873

(b) $242,627

Explanation:

Given that,

Purchases = $440,600;

Purchase Returns and Allowances = $11,980;

Purchase Discounts = $8,247; and

Freight-in = $16,900.

Beginning inventory = $57,710,

Ending inventory = $88,110

Net sales = $649,500

Cost of goods sold:

= Beginning inventory + Purchases + Freight-in - Purchase Returns and Allowances - Purchase Discounts - Ending inventory

= $57,710 + $440,600 + $16,900 - $11,980 - $8,247 - $88,110

= $406,873

Gross profit:

= Net sales - Cost of goods sold

= $649,500 - $406,873

= $242,627