On January 1, Escobar Supply’s inventory account had a beginning balance of $7,740,000. Escobar engaged in the following transactions during the year:

1. Purchased merchandise inventory for $11,400,000.

2. Generated net sales of $31,200,000.

3. Reported gross profit for the year of $18,000,000 in its income statement.

a. At what amount was Cost of Goods Sold reported in the company’s year-end income statement?

b. At what amount was Merchandise Inventory reported in the company’s year-end balance sheet?

c. If Escobar Supply had taken cash discounts on inventory purchases in the past, as well as in the current year, how would this have affected your answers to the above questions?