Question

Sanchez Company engaged in the following transactions during Year 1: Started the business by issuing $42,000 of common stock for cash. The company paid cash to purchase $26,400 of inventory. The company sold inventory that cost $16,000 for $30,600 cash. Operating expenses incurred and paid during the year, $14,000. Sanchez Company engaged in the following transactions during Year 2: The company paid cash to purchase $35,200 of inventory. The company sold inventory that cost $32,800 for $57,000 cash. Operating expenses incurred and paid during the year, $18,000. Sanchez uses the perpetual inventory system. What is Sanchez's gross margin for the Year 2?

Answer 1

Answer:

The gross margin is $24,200

Explanation:

The computation of the gross margin is shown below:

As we know that

Gross margin is

= Sales - cost of goods sold

= $57,000 - $32,800

= $24,200

We simply deduct the cost of goods sold from the sales so that the gross margin could come

hence, the gross margin is $24,200

We simply applied the above formula