During the year ended 31 December, the business made sales of £35,000 and purchases of £20,000. Inventory at the beginning of the year was valued at £6,000 and, at 31 December, inventory was valued at £3,500. The gross profit for the year was:
A) £17,500.
B) £24,500.
C) £12,500.
D) £5,500.

Question

Quizplus · Accepted Answer

Gross profit is calculated as Sales minus Cost of Goods Sold (COGS). COGS is calculated as Opening Inventory plus Purchases minus Closing Inventory. Here, COGS = £6,000 + £20,000 - £3,500 = £22,500. Therefore, Gross Profit = £35,000 - £22,500 = £12,500.

During the Year Ended 31 December, the Business Made Sales