Kimble Company reported the following select information as of October 31, 2019. Using the data below, compute
A) Cost of Goods Sold and
B) Gross Profit:

Merchandise Inventory, 11/1/18 $12,000
Merchandise Inventory, 10/31/19 $30,000
Net Sales $187,000
Net Purchases $60,700
Freight-In $6,500

A) $49,200

B) $137,800

Explanation:

The  net purchase is the total purchase less allowances. The movement in the balance of inventory at the start and end of a period is as a result of sales and purchases. While sales reduces the balance in inventory, purchases increases the balance. This may be expressed mathematically as

Opening balance + purchases - cost of goods sold = closing balance

$12,000 + $60,700 + $6,500 - cost of goods sold = $30,000

cost of goods sold = $12,000 + $60,700 + $6,500 - $30,000

= $49,200

Gross profit is the difference between the sales and the cost of goods sold

= $187,000 - $49,200

= $137,800

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