Question

Reyes Company had a gross profit of $620,000, total purchases of $840,000, and an ending inventory of $480,000 in its firstyear of operations as a retailer. Reyes's sales in its first year must have been

a. $980,000.
b. $1,120,000.
c. $360,000.
d. $1,100,000.

Answer 1

The sales for Reyes Company in its first year must have been $980,000, calculated by adding the gross profit of $620,000 to the cost of goods sold of $360,000.

Step-by-step explanation:

The question is about determining the sales amount for Reyes Company based on the given gross profit, total purchases, and ending inventory. We know that gross profit is calculated by subtracting the cost of goods sold (COGS) from sales. To find COGS, we can use the formula: COGS = Beginning Inventory + Purchases - Ending Inventory. Reyes Company is in its first year, so we can assume the beginning inventory is $0. Thus, COGS = $0 + $840,000 - $480,000 = $360,000. Having found COGS, we can now find the sales: Sales = Gross Profit + COGS = $620,000 + $360,000 = $980,000.