Golden Arch Company uses the periodic inventory system. It has compiled the following information in order to prepare the financial statements at December 31, 2019: Gross sales during 2019 $2,000,000 Sales returns and allowances during 2019 50,000 Beginning inventory, January 1, 2019 100,000 Ending inventory, December 31, 2019 120,000 Purchases during 2019 750,000 Required: Calculate the Cost of goods sold and Gross profit for the company during 2019.

See below

Explanation:

Given the information above, cost of goods sold and the gross profit is calculated as;

Cost of goods sold for the company during 2019

= Beginning inventory + Net purchases - Ending inventory

= Beginning inventory + (Purchases - Purchase return) - Ending inventory

= $100,000 + ($750,000 - $0) - $120,000

= $100,000 + $750,000 - $120,000

= $730,000

Gross profit for the company during 2019

= Net Sales - Cost of goods sold

= (Gross sales - Sales return and allowances) - Cost of goods sold

= ($2,000,000 - $50,000) - $730,000

= $1,950,000 - $730,000

= $1,220,000

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