Gross profit

Question

During the current year, merchandise is sold for $107,300 cash and $586,200 on account. The cost of the goods sold is $464,600. What is the amount of the gross profit?

Answer 1

Gross profit is calculated by subtracting the cost of goods sold (COGS) from total sales revenue.

First, we need to calculate the total sales revenue:

\[ \text{Total Sales Revenue} = \text{Cash Sales} + \text{Sales on Account} \]

Using the values given:

\[ \text{Total Sales Revenue} = 107,300 + 586,200 = 693,500 \]

Now, we can calculate the gross profit:

\[ \text{Gross Profit} = \text{Total Sales Revenue} - \text{Cost of Goods Sold} \]

Substituting in the values:

\[ \text{Gross Profit} = 693,500 - 464,600 = 228,900 \]

Therefore, the amount of the gross profit is $228,900.