Darlington Company entered into the following business events during its first month of operations. The company uses the perpetual inventory system. 1)The company purchased $12,400 of merchandise on account under terms 2/10, n/30.2)The company returned $1,900 of merchandise to the supplier before payment was made.3)The liability was paid within the discount period.4)All of the merchandise purchased was sold for $18,800 cash.
What is the gross margin that results from these four transactions?

Question

Quizplus · Accepted Answer

The gross margin is calculated as sales revenue minus the cost of goods sold. The company purchased $12,400 of merchandise and returned $1,900, leaving $10,500. They paid within the discount period, so they received a 2% discount on $10,500, which is $210, making the cost $10,290. The sales revenue is $18,800. Therefore, the gross margin is $18,800 - $10,290 = $8,510.

Darlington Company Entered into the Following Business Events During Its