Question

Littleton Books has the following transactions during May. May 2 Purchases books on account from Readers Wholesale for $3,600, terms 1/10, n/30. May 3 Pays cash for freight costs of $230 on books purchased from Readers. May 5 Returns books with a cost of $300 to Readers because part of the order is incorrect. May 10 Pays the full amount due to Readers. May 30 Sells all books purchased on May 2 (less those returned on May 5) for $4,300 on account. Required: Record the period-end adjustment to cost of goods sold on May 31, assuming the company has no beginning or ending inventory

Answer 1

The period-end adjustment to cost of goods sold on May 31 can be calculated by subtracting the cost of goods returned from the cost of goods purchased and multiplying it by the net profit percentage.

Step-by-step explanation:

The period-end adjustment to the cost of goods sold on May 31, assuming the company has no beginning or ending inventory, can be calculated by subtracting the cost of goods returned from the cost of goods purchased and multiplying it by the net profit percentage.

In this case, the total cost of goods purchased is $3,600 and the cost of goods returned is $300. Therefore, the net cost of goods sold is $3,300. The net profit percentage is calculated by dividing the net profit by the net revenue (selling price) which is $300. Therefore, the period-end adjustment to the cost of goods sold is $3,300.