Answer:
$7,726
Explanation:
The return outward of $1,200 will be used to reduce the account payable of $12,500 since it has been returned. We therefore have:
Net account payable = $12,500 - $1,200 = $11,300
Also, the terms 2/10, n/30 implies that the company is entitled to a 2% discount since it paid before the 10-day discount period. This 2% discount will be used to reduce the net account payable to obtain cost of goods sold as follows:
Cost of goods sold = $11,300 – ($11,300 × 2%) = $11,300 – 226 = $11,074
We can now calculate the gross margin as follows:
Gross margin = Sales revenue – Cost of goods sold = $18,800 – 11,074 = $7,726
Therefore, the gross margin from the four transactions is $7,726.
