Assume the perpetual inventory method is used.
1) The company purchased $12,500 of merchandise on account under terms 2/10, n/30.
2) The company returned $1,200 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.
The amount of gross margin from the four transactions is:"

Question

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1) The company purchased $12,500 of merchandise on account under terms 2/10, n/30. => They can take a 2% discount if paid within 10 days.
2) The company returned $1,200 of merchandise to the supplier before payment was made.
Therefore, the net amount due within the discount period = $12,500 - $1,200 = $11,300.
The discount is 2% of $11,300 = $226, which means the company can pay $11,300 - $226 = $11,074 and still take advantage of the discount.
3) The liability was paid within the discount period, which means the company paid $11,074. This is the cost of the merchandise.
4) All of the merchandise purchased was sold for $18,800 cash, which means the revenue is $18,800.
The gross margin is the revenue minus the cost of the merchandise:
Gross Margin = Revenue - Cost of Merchandise
Gross Margin = $18,800 - $11,074
Gross Margin = $7,726
Therefore, the answer is B) $7,726.

Assume the Perpetual Inventory Method Is Used