At the beginning of the year, Uptown Athletic had an inventory of $400,000. During the year, the company purchased goods costing $1,500,000. If Uptown Athletic reported ending inventory of $500,000 and sales of $2,000,000, their cost of goods sold and gross profit rate would be
A) $1,000,000 and 70%.
B) $1,400,000 and 30%.
C) $1,000,000 and 30%.
D) $1,400,000 and 70%.

Question

Quizplus · Accepted Answer

Cost of Goods Sold (COGS) is calculated as: Beginning Inventory + Purchases - Ending Inventory = $400,000 + $1,500,000 - $500,000 = $1,400,000. Gross Profit is Sales - COGS = $2,000,000 - $1,400,000 = $600,000. Gross Profit Rate is Gross Profit / Sales = $600,000 / $2,000,000 = 30%.

At the Beginning of the Year, Uptown Athletic Had an Inventory