Question: Calculating and presenting gross profit.

a) Show how the gross profit section of the income statement would appear after the following transactions have taken place.

b) Assuming that the inventory at the beginning of the period was $5000, what would be the amount of inventory showing on the balance sheet at the end of the period?

Transactions:

1. Purchased books from Amazon Co. for a cost of $3000, terms 1/10,n/30 and paid the bill within the discount period.

2. Paid freight on the above purchase of $190.

3. Returned one book to Amazon Co. for $250 because it was damaged. Freight cost was covered by Amazon.

4. Sold books costing $1850 to students for $3400 for cash.

5. Granted credit of $ 180 to one student for the return a book since the student dropped the course. The cost of the book was $160.

6. Sold books costing $1500 for $2900 to Bennys Book Shop, terms 2/10, n/30. The shop paid on the 8th day. We paid the shipping costs of $200 for this order.