Question

Thompson TV and Appliance reported the following in its 2016 financial statements: 2016 Sales $420,000 Cost of goods sold: Inventory, January 1 82,000 Net purchases 340,000 Goods available for sale 422,000 Inventory, December 31 86,000 Cost of goods sold 336,000 Gross profit $ 84,000 Thompson's 2016 gross profit ratio is:

A. 20%.
B. 25%.
C. 19%.
D. None of these is correct.

Answer 1

gross profit ratio = 20%

so correct option is A. 20%

Step-by-step explanation:

given data

Sales= $420,000

Inventory = 82,000

Net purchases = 340,000

Goods available for sale = 422,000

Inventory = 86,000

Cost of goods sold = 336,000

Gross profit = $84,000

to find out

gross profit ratio

solution

we get here gross profit ratio that is express as

gross profit ratio = Gross profit ÷ Sales ..................1

put here value we get

gross profit ratio =
`(84000)/(420000)`

solve we get

gross profit ratio = 20%

so correct option is A. 20%