Asked by DELINA FILLI on May 01, 2024
Verified
Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the goods sold was $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions?
A) $10,500
B) $30,772
C) $7,972
D) $31,400
Credit Memo
A document issued to a purchaser by a vendor to reduce the amount that the purchaser owes, often as a result of a return or refund.
Gross Profit
The difference between the revenue earned from sales and the cost of goods sold, not accounting for other expenses.
- Ascertain the net income and gross profit by analyzing the given financial data.
- Comprehend the impact of sales discounts, returns, and freight charges on business transactions.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
C
Explanation :
The gross profit is calculated as the sales revenue minus the cost of goods sold (COGS). Initially, the sales revenue is $35,000, and the COGS is $24,500, resulting in a gross profit of $10,500. However, merchandise worth $3,600 is returned, reducing both the sales revenue and the COGS (since the returned goods cost $1,700). The adjusted sales revenue is $35,000 - $3,600 = $31,400, and the adjusted COGS is $24,500 - $1,700 = $22,800. Gomez Co. pays within the discount period, so they take a 2% discount on the adjusted sales revenue: $31,400 * 2% = $628. The final sales revenue after the discount is $31,400 - $628 = $30,772. Therefore, the final gross profit is $30,772 (adjusted sales revenue) - $22,800 (adjusted COGS) = $7,972.
Learning Objectives
- Ascertain the net income and gross profit by analyzing the given financial data.
- Comprehend the impact of sales discounts, returns, and freight charges on business transactions.
Related questions
Given: Sales of $14 Million;implicit Costs of $3 Million;and Explicit ...
How Much Are the Firm's Total Profits in the Graph ...
El Centro Company Began the Year with Owner's Equity of ...
Eli's Electronic Repair Shop Started the Year with Total Assets ...
Luis Consulting Started the Year with Total Assets of $60000 ...