At the beginning of the current season on December 1, the ledger of Rainbow Store showed Cash $31,850, Inventory $52,550, and Share Capital—Ordinary $84,400. At the end of fiscal year December 31, 2020, these accounts appeared in its adjusted trial balance.

Account receivable $75,500

Purchases 435,500

Purchase Discounts 7,650

Purchase Returns and Allowances 3,450

Freight-In 17,500

Account Payable 65,000

Sales Revenue 985,000

Sales Returns and Allowances 21,500

Sales Discount 14,250

Freight-out 7,450

Supplies expenses 7,600

Rent expenses 18,500

Salaries and Wages Expense 36,000

Advertising Expense 24,400

Utilities Expense 14,200

Maintenance and Repairs Expense 12,100

Interest expenses 4,500

Additional facts:

1. Merchandise inventory on December 31, 2020, is $64,600.

REQUIRED

1. Calculate Cost of Goods sold for December 31, 2020.

2. Prepare an income statement through gross profit for the year ended December 31, 2020.