Use the following financial information to find the entry you would make on an income statement for GROSS MARGIN for the year ended December 31, 2011: Gross Sales, $231,000; Sales Returns and Allowances, $7,700; Sales Discounts, $6,800; Merchandise Inventory, January 1, 2011, $55,200; Merchandise Inventory, December 31, 2011, $61,300; Net Purchases, $81,900; Freight In, $950; Salaries, $87,000; Rent, $20,600; Utilities, $1,500; Insurance, $2,350; and Income Tax, $17,350.
A) $216,500
B) $139,750
C) $128,800
D) $87,700

Question

Quizplus · Accepted Answer

Gross Margin is calculated as Net Sales minus Cost of Goods Sold (COGS). Net Sales = Gross Sales - Sales Returns and Allowances - Sales Discounts = $231,000 - $7,700 - $6,800 = $216,500. COGS = Beginning Inventory + Net Purchases + Freight In - Ending Inventory = $55,200 + $81,900 + $950 - $61,300 = $76,750. Therefore, Gross Margin = Net Sales - COGS = $216,500 - $76,750 = $139,750.

Use the Following Financial Information to Find the Entry You