Question

On January 1, 2020, Oriole Company had inventory of $53,500. At December 31, 2020, Oriole had the following account balances.

Freight-in $5,000
Purchases 509,000
Purchase discounts 7,700
Purchase returns and allowances 3,500
Sales revenue 809,000
Sales discounts 5,900
Sales returns and allowances 11,500

At December 31, 2020, Oriole determines that its ending inventory is $63,500.

a. Compute Christel Madan’s 2020 gross profit.
b. Compute Christel Madan’s 2020 operating expenses if net income is $142,000 and there are no nonoperating activities.

Answer 1

Gross Profit = $171,800

Operating expenses = $29,800

Step-by-step explanation:

The computation of gross profit and operating expenses is given below:-

Purchase = $509,000

Purchase discount = $7,700

Purchase returns and allowances =$3,500

Net purchase = $509,000 - $7,700 - $3,500

= $497,800

Cost of goods sold = Net purchase + Freight-in + Inventory + Ending inventory

= $497,800 + $5,000 + $53,500 + $63,500

= $619,800

Gross Profit = Net sales - Cost of goods sold

= ($809,000 - $5,900 - $11,500) - $619,800

= $171,800

Operating expenses = $171,800 - $142,000

= $29,800