Question

The following is select account information for August Sundries. Sales: $850,360; Sales Returns and Allowances: $148,550; COGS: $300,840; Operating Expenses: $45,770; Sales Discounts: $231,820. If August Sundries uses a multi-step income statement format, what is their gross margin?

a) $399,570
b) $449,570
c) $499,570
d) $549,570

Answer 1

The gross margin for August Sundries is calculated by subtracting sales returns and allowances, sales discounts, and COGS from sales, which results in a gross margin of $169,150. None of the provided options match this calculation.

Step-by-step explanation:

To calculate the gross margin for August Sundries using a multi-step income statement format, we need to subtract both sales returns and allowances and the cost of goods sold (COGS) from sales. Additionally, sales discounts should also be subtracted from the sales to get the net sales before calculating the gross margin. Here's the calculation:

• Sales: $850,360
• Less: Sales Returns and Allowances: $148,550
• Less: Sales Discounts: $231,820
• Net Sales: $850,360 - $148,550 - $231,820 = $469,990
• Less: COGS: $300,840
• Gross Margin: $469,990 - $300,840 = $169,150

Based on the information provided and the calculations above, the closest answer to the gross margin would be none of the provided options (a) $399,570, (b) $449,570, (c) $499,570, or (d) $549,570.