Up-to-date Merchandisers has the following transactions for the month of July. $$\begin{array} { | l | r | }
\hline \text { Sales revenue } & \$ 460,000 \
\hline \text { Cost of goods sold } & 300,000 \
\hline \text { Operating expenses } & 85,000 \
\hline \text { Sales discounts } & 20,000 \
\hline \text { Sales returns and allowances } & 15,000 \
\hline \text { Interest revenue } & 5,000 \
\hline
\end{array}$$ Calculate Gross Profit.

Question

Up-to-date Merchandisers has the following transactions for the month of July. $$\begin{array} { | l | r | } 
\hline \text { Sales revenue } & \$ 460,000 \
\hline \text { Cost of goods sold } & 300,000 \
\hline \text { Operating expenses } & 85,000 \
\hline \text { Sales discounts } & 20,000 \
\hline \text { Sales returns and allowances } & 15,000 \
\hline \text { Interest revenue } & 5,000 \
\hline
\end{array}$$ Calculate Gross Profit.

Quizplus · Accepted Answer

Gross profit is calculated by subtracting cost of goods sold from sales revenue. In this case, gross profit is: 
$460,000 - $300,000 = $160,000

However, sales discounts and sales returns and allowances need to be subtracted from gross profit to arrive at the final gross profit. 
$160,000 - $20,000 - $15,000 = $125,000

Therefore, the correct answer is B) $125,000.

Up-To-Date Merchandisers Has the Following Transactions for the Month of July