Ballard Company uses the perpetual inventory system.The company purchased $16,000 of merchandise from Andes Company under the terms 2/10,net/30.Ballard paid for the merchandise within 10 days and also paid $500 freight to obtain the goods under terms FOB shipping point.All of the merchandise purchased was sold for $30,000 cash.The amount of gross margin for this merchandise is:

Question

Quizplus · Accepted Answer

The cost of goods sold (COGS) is calculated as follows:
Purchase price = $16,000
Less: Discount (2% of $16,000) = $320
Net purchase price = $15,680
Add: Freight = $500
Total cost = $16,180

Since all of the merchandise purchased was sold for $30,000, the gross margin can be calculated as follows:

Gross margin = Sales - COGS
Gross margin = $30,000 - $16,180
Gross margin = $13,820

Therefore, the answer is B) $13,820.

Ballard Company Uses the Perpetual Inventory System