Question

Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the goods sold was $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions? a. $31,400 b. $7,972 c. $30,772 d. $10,500

Answer 1

Answer:

b. $7,972

Explanation:

The computation of the amount of the gross profit earned is shown below:

But before that we have to do the following calculations

Net sales = $35,000 - $3,600 = $31,400

Merchandise cost = $24,500 - $1,700 = $22,800

Discount allowed= $31400 × 2% = $628

Now

Gross profit earned  is

= $31,400 - $22,800 - $628

= $7,972