Question

A company has the following items on its year-end trial balance:Net sales $500‚000Common stock 100,000Insurance expense 75,000Wages 50,000Cost of goods sold 100,000Cash 40,000Accounts payable 25,000Interest payable 25,000What is the company's gross profit?A. $230‚000B. $500,000C. $400,000D. $275‚000

Answer 1

Answer:

C. $400,000

Explanation:

The computation of the gross profit is shown below:

Gross profit = Net Sales - costs of goods sold

                   = $500,000 - $100,000

                   = $400,000

For determining the gross profit, we deduct the costs of goods sold from the net sales, so that the true value can come. It is shown in the income statement  

All other information which is given is not relevant. Hence, ignored it