The following information was taken from the 20B income statement of Milburn Company: Pretax profit, $12,000; Total operating expenses, $20,000; Sales revenue, $120,000. Compute the cost of goods sold.
A) $108,000
B) $88,000
C) $100,000
D) $112,000

Question

Quizplus · Accepted Answer

To find the cost of goods sold, we need to use the formula: Cost of Goods Sold = Sales Revenue - Gross Profit. We can find Gross Profit by subtracting Total Operating Expenses from Sales Revenue. 
Gross Profit = Sales Revenue - Total Operating Expenses 
Gross Profit = $120,000 - $20,000 
Gross Profit = $100,000 
Cost of Goods Sold = Sales Revenue - Gross Profit 
Cost of Goods Sold = $120,000 - $100,000 
Cost of Goods Sold = $88,000 
Therefore, the correct answer is B: $88,000.

The Following Information Was Taken from the 20B Income Statement