Gannon Company had the following information at December 31: If the cost of goods manufactured during the year amounted to $1,260,000 and annual sales were $1,650,000, the amount of gross profit for the year is

Question

Gannon Company had the following information at December 31:  If the cost of goods manufactured during the year amounted to $1,260,000 and annual sales were $1,650,000, the amount of gross profit for the year is

Quizplus · Accepted Answer

Gross profit is calculated as sales revenue minus cost of goods sold. We need to first calculate cost of goods sold by adding beginning inventory to cost of goods manufactured and subtracting ending inventory.

Beginning inventory = $175,000
Cost of goods manufactured = $1,260,000
Ending inventory = $130,000

Cost of goods sold = Beginning inventory + Cost of goods manufactured - Ending inventory
= $175,000 + $1,260,000 - $130,000
= $1,305,000

Now, gross profit can be calculated as follows:

Gross profit = Sales revenue - Cost of goods sold
= $1,650,000 - $1,305,000
= $345,000

Therefore, the amount of gross profit for the year is $345,000. None of the answer choices match this exact number, but C is the closest with $450,000.

Gannon Company Had the Following Information at December 31