Question

Abbey Co. sold merchandise to Gomez Co. on account, $33,600, terms 2/15, net 45. The cost of the merchandise sold was $13,900. Abbey Co. issued a credit memo for $2,700 for merchandise returned that originally cost $1,500. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions

Answer 1

$17,882

Step-by-step explanation:

For computing the gross profit earned first we have to determine the net sales, net cost and discount which is shown below:

Net sales is

= Sale value of merchandise - returned sale goods value

= $33,600 - $2,700

= $30,900

Net cost is

= Cost of merchandise sold - returned cost goods value

= $13,900 - $1,500

= $12,400

Discount allowed is

= $30,900 × 2%

= $618

Now the gross profit earned is

= Net sales - net cost - discount allowed

= $30,900 - $12,400 - $618

= $17,882