At the beginning of the year Pace Company had an inventory of $750000. During the year the company purchased goods costing $2400000. If Pace Company reported ending inventory of $758000 and sales of $3680000 the company's cost of goods sold and gross profit rate must be
A) $1288000 and 53.8%.
B) $2392000 and 35%.
C) $1288000 and 35%.
D) $2392000 and 65%.

Question

Quizplus · Accepted Answer

To calculate the cost of goods sold, we use the formula: Beginning inventory + Purchases - Ending inventory = Cost of goods sold.

Therefore, Cost of goods sold = $750000 + $2400000 - $758000 = $2392000

To calculate the gross profit rate, we use the formula: Gross profit rate = (Gross profit/Net sales) x 100%.

We can calculate the gross profit by subtracting the cost of goods sold from the sales: Gross profit = $3680000 - $2392000 = $1288000

Therefore, Gross Profit rate = ($1288000/$3680000) x 100% = 35%

Hence, the answer is choice B ($2392000 and 35%)

At the Beginning of the Year Pace Company Had an Inventory