Calculate gross profit given the following information: accounts receivable = $3,500; inventory = $4,500; receivable turnover = 80 times; inventory turnover = 18 times.
A) $199,000
B) $209,000
C) $219,000
D) $229,000
E) $239,000

Question

Quizplus · Accepted Answer

Gross profit can be calculated using the inventory turnover formula: Cost of Goods Sold (COGS) = Inventory * Inventory Turnover. Here, COGS = $4,500 * 18 = $81,000. Sales can be calculated using the receivable turnover formula: Sales = Accounts Receivable * Receivable Turnover. So, Sales = $3,500 * 80 = $280,000. Gross Profit = Sales - COGS = $280,000 - $81,000 = $199,000.

Calculate Gross Profit Given the Following Information: Accounts Receivable =