Question

Ballard Company uses the perpetual inventory system. The company purchased $9,700 of merchandise from Andes Company under the terms 3/10, net/30. Ballard paid for the merchandise within 10 days and also paid $420 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $18,400 cash. The amount of gross margin for this merchandise is:a. $8,280. b. $9,700. c. $8,571.d. $8,700.

Answer 1

c. $ 8,571

Step-by-step explanation:

Computation of gross margin

Purchase cost $ 9,700

Less: Discount availed 3 % $ ( 291)

Net purchases $ 9,409

Add: Freight $ 420

Total cost of merchandise $ 9,829

Sales value $ 18,400

Gross margin on merchandise sales $ 8,571