Response to the following problem:
Best Brands' general ledger and supplementary records at the end of its current period reveal the following.
Sales . . . . . . . . . . . . . . . . . . . . . $430,000
Merchandise inventory (beginning of period) . . . . . . $ 49,000
Sales returns . . . . . . . . . . . . . . 18,000
Invoice cost of merchandise purchases . . . . . . . . . . . 180,000
Sales discounts . . . . . . . . . . . . 6,600
Purchase discounts received . . . . . . . . . . . . . . . . . . . . 4,500
Cost of transportation-in . . . . 11,000
Purchase returns and allowances . . . . . . . . . . . . . . . . 5,500
Operating expenses . . . . . . . . 20,000
Merchandise inventory (end of period) . . . . . . . . . . . 42,000
Required:
1. Each member of the team is to assume responsibility for computing one of the following items. You are not to duplicate your teammates' work. Get any necessary amounts to compute your item from the appropriate teammate. Each member is to explain his or her computation to the team in preparation.
a. Net sales d. Gross profit
b. Total cost of merchandise purchases e. Net income
c. Cost of goods sold
2. Check your net income with the instructor. If correct, proceed to step 3.
3. Assume that a physical inventory count finds that actual ending inventory is $38,000. Discuss how this affects previously computed amounts in step 1.