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:

Answer 1

$8,571

Step-by-step explanation:

The computation of amount of gross margin is shown below:-

Total Purchase = Purchase - Purchase discount + Freight paid

= $9,700 - ($9,700 × 3%) + $420

= $9,700 - $291 + $420

= $9,829

Gross Margin = Sales - Total Purchase

= $18,400 - $9,829

= $8,571

Therefore for computing the Gross Margin we simply appied the above formula.