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Assume that Blossom Company uses a periodic inventory system and has these account balances: Purchases $374,100; Purchase Returns and Allowances $12,700; Purchase Discounts $6,000; and Freight-in $16,600. Blossom Company has beginning inventory of $61,600, ending inventory of $88,100, and net sales of $652,800. Determine the amounts to be reported for cost of goods sold and gross profit.

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Answer and Explanation:

The computation of the amount that should be reported for the cost of goods sold and the gross profit is shown below;

But before that first determine the following amounts

Adjusted Purchases = Purchases  - Purchase Returns and Allowances  - Purchase Discounts  + Freight-in

= $374,100 - $12,700 - $6,000 + $16,600

= $372,000

Now the cost of goods sold is

= Beginning Inventory + Adjusted Purchases - ending Inventory

= $61,600 + $372,000 - $88,100

= $345,500

And,

Gross Profit = Net Sales - cost of goods sold

= $652,800 - $345,500

= $307,300

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