Question

Given the following account balances, calculate gross profit:

Sales $40,000

Selling expense $13,000

Administrative expense $8,000

Cost of goods sold $16,000

a. $3,000

b. $27,000

c. $32,000

d. $24,000

Answer 1

The gross profit is calculated by subtracting the Cost of Goods Sold from the Sales revenue, resulting in a gross profit of $24,000.

Step-by-step explanation:

To calculate the gross profit, we need to subtract the Cost of Goods Sold (COGS) from the Sales revenue. In this case, the COGS is $16,000, and the sales revenue is $40,000.

Gross Profit = Sales - COGS

Gross Profit = $40,000 - $16,000 = $24,000

Thus, the correct answer is d. $24,000. It is important to remember that selling and administrative expenses are not subtracted when calculating gross profit; these are considered when calculating net profit.