Prior to taking a physical inventory at year?end, the perpetual inventory records of Athena Designs showed an inventory of $26,000, sales of $358,000, and a cost of goods sold of $215,000. The year?end physical inventory indicated merchandise on hand costing $24,000. The company's gross profit for the year was:

Question

Quizplus · Accepted Answer

The gross profit is calculated as sales minus cost of goods sold. In this case, sales were $358,000 and the cost of goods sold was $215,000, so the gross profit is $358,000 - $215,000 = $143,000. However, the physical inventory at year-end indicated merchandise on hand costing $24,000, which is $2,000 less than the perpetual inventory records showed. This means that the cost of goods sold was actually $215,000 + $2,000 = $217,000. Therefore, the gross profit is $358,000 - $217,000 = $141,000.

Prior to Taking a Physical Inventory at Year?end, the Perpetual