Assume the perpetual inventory method is used.
1) Marathon Company purchased merchandise inventory that cost $8,000 under terms of 2/10, n/30 and FOB shipping point.
2) Marathon paid freight cost of $500 on the merchandise.
3) Marathon made payment to the supplier within the discount period.
4) All of the goods were sold to customers on account for $12,000.
The gross margin from these transactions of Marathon Company is

Question

Quizplus · Accepted Answer

The cost of goods sold (COGS) can be calculated as follows:
Merchandise inventory cost: $8,000
Add: Freight cost: $500
Total cost: $8,500
Less: Discount (2% of $8,000): $160
Net cost: $8,340

Therefore, the COGS is $8,340.

The gross margin is the revenue minus the COGS.
Revenue: $12,000
COGS: $8,340

Gross margin: $12,000 - $8,340 = $3,660

Therefore, the correct answer is C.

Assume the Perpetual Inventory Method Is Used