Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the goods sold was $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions?

Question

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Gross profit earned by Abbey Co. = Sales after discount - Selling price of returned merchandise after discount - (Cost of goods sold - Cost of merchandise returned) = [$35,000 - ($35,000 × 2%)] - [$3,600 - ($3,600 × 2%)] - ($24,500 - $1,700) = $7,972

Abbey Co Sold Merchandise to Gomez Co