Reyes Company had a gross profit of $720,000, total purchases of $840,000, and an ending inventory of $480,000 in its first year of operations as a retailer. Reyes's sales in its first year must have been
A) $1,080,000.
B) $1,320,000.
C) $360,000.
D) $1,200,000.

Question

Quizplus · Accepted Answer

Gross profit is calculated as Sales - Cost of Goods Sold (COGS). COGS is calculated as Beginning Inventory + Purchases - Ending Inventory. Since it's the first year, Beginning Inventory is $0. So, COGS = $0 + $840,000 - $480,000 = $360,000. Therefore, Sales = Gross Profit + COGS = $720,000 + $360,000 = $1,080,000.

Reyes Company Had a Gross Profit of $720,000, Total Purchases