The following data is available: $$\begin{array} { | l | r | }
\hline \text { Net sales } & \$ 13,000 \
\hline \text { Normal gross profit } & 45 \% \
\hline \text { Beginning inventory } & 8,000 \
\hline \text { Net purchases } & 7,000 \
\hline
\end{array}$$ Using the gross profit method, the amount of gross profit would be:

Question

The following data is available: $$\begin{array} { | l | r | } 
\hline \text { Net sales } & \$ 13,000 \
\hline \text { Normal gross profit } & 45 \% \
\hline \text { Beginning inventory } & 8,000 \
\hline \text { Net purchases } & 7,000 \
\hline
\end{array}$$ Using the gross profit method, the amount of gross profit would be:

Quizplus · Accepted Answer

The gross profit method formula is:
Net Sales - Cost of Goods Sold = Gross Profit
To calculate the cost of goods sold, we use the following formula:
Beginning Inventory + Net Purchases - Ending Inventory = Cost of Goods Sold

We are given the net sales and beginning inventory, and we can calculate the ending inventory by subtracting the cost of goods sold from the beginning inventory and net purchases.
Beginning Inventory + Net Purchases - Ending Inventory = Cost of Goods Sold
$8,000 + $7,000 - Ending Inventory = Cost of Goods Sold
$15,000 - Ending Inventory = Cost of Goods Sold

To calculate the gross profit, we use the following formula:
Net Sales - Cost of Goods Sold = Gross Profit
$13,000 - ($15,000 - Ending Inventory) = Gross Profit
$13,000 - $15,000 + Ending Inventory = Gross Profit
Ending Inventory - $2,000 = Gross Profit

Now we need to calculate the normal gross profit rate. We are given that the normal gross profit is 45%, which means that for every dollar of sales, we expect to earn 45 cents of gross profit.
Normal Gross Profit Rate = Normal Gross Profit / Net Sales
0.45 = Normal Gross Profit / $13,000
Normal Gross Profit = $5,850

Finally, we can substitute our values into the equation for gross profit:
Gross Profit = Ending Inventory - $2,000
$5,850 = Ending Inventory - $2,000
Ending Inventory = $7,850

Now we can calculate the cost of goods sold:
Beginning Inventory + Net Purchases - Ending Inventory = Cost of Goods Sold
$8,000 + $7,000 - $7,850 = Cost of Goods Sold
$7,150 = Cost of Goods Sold

Therefore, the answer is C) $5,850.

The Following Data Is Available Using the Gross Profit Method, the Amount of Gross Profit