Link Back to Chapter 5 (Cost of Goods Sold. Gross Profit). 1. Austin Sound Center's special journals in Exhibits 6-10 through 6-13 (pages 236-243) provide the owner with much of the data needed for preparation of the financial state- ments. Austin Sound uses the perpetual inventory system, so the amount of cost of goods sold is simply the ending balance in that account. Charles Ernest, the owner, needs to know the business's gross profit for November. Compute the gross profit. 2. Suppose Austin Sound uses the periodic inventory system. In that case, the business must compute cost of goods sold by the following formula:

Cost of goods sold: Beginning inventory. X* + Net purchases..... XXX = Cost of goods available for sale X.XXX - Ending inventory.. (XX) XX = Cost of goods sold.. *50 for Austin Sound at November 1. Perform this calculation of cost of goods sold for Austin Sound. Does this computation of cost of goods sold agree with your answer to requirement 1?