Michelin Jewelers uses the perpetual inventory system. On April 2, Michelin sold merchandise for $50,000 to a customer on account with terms of 2/15, n/30. The allowance and returns on this sale amounted to $2,000 and $8,000, respectively. The cost of goods sold was $22,000. On April 20, Michelin received payment from the customer. Calculate the amount of gross profit.
A)$40,000
B)$22,000
C)$18,000
D)$15,000

Question

Quizplus · Accepted Answer

The net sales can be calculated as follows:
Sales = $50,000
Less: Returns and allowances = $2,000 + $8,000 = $10,000
Net sales = $50,000 - $10,000 = $40,000
The cost of goods sold is given as $22,000. Using the formula, gross profit can be calculated as follows:
Gross Profit = Net Sales - Cost of goods sold
Gross Profit = $40,000 - $22,000 = $18,000
Therefore, the amount of gross profit is $18,000. Option C is correct.

Michelin Jewelers Uses the Perpetual Inventory System