At the beginning of the year, Hunt Company had an inventory of $750,000. During the year, the company purchased goods costing $2,400,000. If Hunt Company reported ending inventory of $900,000 and sales of $3,750,000, the company's cost of goods sold and gross profit rate must be
A) $1,500,000 and 66.7%.
B) $2,250,000 and 40%.
C) $1,500,000 and 40%.
D) $2,250,000 and 60%.

Question

Quizplus · Accepted Answer

Cost of goods sold = Beginning inventory + Purchases - Ending inventory
= $750,000 + $2,400,000 - $900,000
= $2,250,000

Gross Profit = Sales - Cost of goods sold
= $3,750,000 - $2,250,000
= $1,500,000

Gross profit rate = Gross profit / Sales
= $1,500,000 / $3,750,000
= 40%

At the Beginning of the Year, Hunt Company Had an Inventory