Tony's Tool Shed specializes in selling small farm tractors. Tony's starts the year with an inventory of $140,000. During the year, the manufacturer delivered $220,000 more inventory. At year-end, Tony's counts his inventory and finds that he has tractors costing a total of $100,000 on hand. During the year, Tony's sales totaled $300,000. What was his gross profit on the sales for the year?

Question

Quizplus · Accepted Answer

Tony had a year-end inventory account balance of $100,000, representing the unsold tractors. The Cost of goods sold in this case equals beginning inventory plus purchases less ending balances of inventory ([$140,000 + 220,000] - $100,000 = $260,000.) Matching the Sales revenue ($300,000) with the Cost of goods sold ($260,000) shows that Tony's gross profit on tractor sales was $40,000.

Tony's Tool Shed Specializes in Selling Small Farm Tractors