Reyes Company had a gross profit of $360,000, total purchases of $420,000, and an ending inventory of $240,000 in its first year of operations as a retailer.Reyes's sales in its first year must have been

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. COGS = $0 + $420,000 - $240,000 = $180,000. Gross Profit = $360,000, so Sales = Gross Profit + COGS = $360,000 + $180,000 = $540,000.

Reyes Company Had a Gross Profit of $360,000, Total Purchases