Question

ABC Company made two purchases at the beginning of Year 1:

• Inventory costing $100
• Land costing $700
Both were sold during Year 1:
• Inventory for $110
• Land for $900
How much gain would ABC Company show on its Year 1 Income Statement?
a) $200
b) $10
c) $210
d) $0

Answer 1

c) $210

Step-by-step explanation:

Calculation for how much gain would ABC Company show on its Year 1 Income Statement

Using this formula

Gain=Amount purchased-Amount sold

Let plug in the formula

Inventory Gain=Inventory costing $100-Inventory sold $110

Inventory Gain=$10

Land Gain=Land costing $700- Land sold $900

Land Gain=$200

Hence, the gain for both inventory and land gain will be:

Land Gain $200 +Inventory Gain $10

=$210

Therefore the amount of gain that ABC Company would show on its Year 1 Income Statement will be $210