Question

4. The following numbers are taken from Bell’s Hardware’s financial statements for their paint department during...

4. The following numbers are taken from Bell’s Hardware’s financial statements for their paint department during the month of May 2018. Calculate their gross profit in dollars based on the following numbers: Sales $9,000 Beginning Inventory $7,000 Purchases $6,000 Ending Inventory $7,200

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Homework Answers

Answer #1

Solution :

The formula for calculating the gross profit is

Gross profit = Sales - Cost of goods sold

The formula for calculating the cost of goods sold is

Cost of goods sold = Beginning Inventory + Purchases - Ending Inventory

As per the information given in the question we have

Sales = $9,000 ; Beginning Inventory = $7,000 ; Purchases = $6,000 ; Ending Inventory = $7,200

Applying the above values in the cost of goods sold formula we have

= $ 7,000 + $ 6,000 - $ 7,200

= $ 5,800

Thus the cost of goods sold = $ 5,800

Applying the above values in the Gross profit formula we have :

Gross profit = $ 9,000 - $ 5,800 = $ 3,200

Thus the gross profit in Dollars of Bell's Hardware for their paint department in the month of May 2018 = $ 3,200

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