Cascade Supply Company's income statement includes sales revenue $122,000, cost of goods sold $80,000, and gross profit $42,000. If ending inventory was accidentally overstated by $5,000, what is the correct amount for gross profit?

Question

Quizplus · Accepted Answer

Gross profit is calculated by subtracting cost of goods sold from sales revenue.

Given:

Sales revenue = $122,000

Cost of goods sold = $80,000

Gross profit = $42,000

If ending inventory was overstated by $5,000, then cost of goods sold would be understated by the same amount.

Adjusted cost of goods sold = $80,000 - $5,000 = $75,000

Adjusted gross profit = $122,000 - $75,000 = $37,000

Therefore, the correct amount for gross profit is $37,000.

Cascade Supply Company's Income Statement Includes Sales Revenue $122,000, Cost