Question

Ballard Company uses the perpetual inventory system. The company purchased $9,800 of merchandise from Andes Company under the terms 2/10, net/30. Ballard paid for the merchandise within 10 days and also paid $430 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $18,600 cash. What is the gross margin that resulted from these transactions

Answer 1

$8,566

Step-by-step explanation:

The computation of the gross margin is shown below:

Purchase of inventory $9,800

Less: Purchase discount ($9,800 × 2%) ($196)

Add: Freight paid $430

Total purchase made $10,034

Sales $18,600

Gross margin ($18,600 - $10,034) $8,566

We simply deduct the sales from the total purchase so that the gross margin amount could come