In its first year of operations as a retailer, Riley Ltd. reported a gross profit of $181,500, total purchases of $225,000, and an ending inventory of $90,000. Therefore, Riley's sales in its first year must have been
A) $91,500.
B) $135,000.
C) $315,000.
D) $316,500.

Question

Quizplus · Accepted Answer

Gross profit = Sales - Cost of goods sold
Cost of goods sold = Total purchases - Ending inventory
Substituting the given values in these formulas, we get:
$181,500 = Sales - ($225,000 - $90,000)
$181,500 = Sales - $135,000
Sales = $316,500

In Its First Year of Operations as a Retailer, Riley