Question

As the accountant of Race Co., you have been requested to calculate (a) net sales, (b) cost of merchandise sold, (c) gross profit, and (d) net income from the following: gross sales, $40,000; sales returns, $3,000; beginning inventory, $6,000; net purchases, $8,000; ending inventory, $1,000; operating expenses, $9,200.

Answer 1

(a) Net sales = Gross sales - Sales return

Net sales = $40,000 - $3,000 = $37,000

(b) Cost of merchandise sold = Beginning inventory + Net purchase - Ending inventory

Cost of merchandise sold = $6,000 + $8,000 - $1,000 = $13,000

(c) Gross profit = Net sales - Cost of merchandise sold

Gross profit = $37,000 - $13,000 = $24,000

(d) Net income = Gross profit - Operating expenses

Net income = $24,000 - $9,200 = $14,800