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.What is the amount of gross margin that resulted from these business events?

Question

Quizplus · Accepted Answer

Note that the cost of inventory sold is the list price less any purchase returns and allowances and purchase discounts,plus transportation-in costs.
Cost of goods sold = List price of purchase - Purchase discount + Transportation-in
Cost of goods sold = $16,000 - ($16,000 × 0.02)+ $500 = $16,180
Gross margin = Net sales - Cost of goods sold
Gross margin = $30,000 - $16,180 = $13,820

Ballard Company Uses the Perpetual Inventory System