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.
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