Need answer in 30 minutes. The owner of a local souvenir shop in Murrells Inlet

Question

Need answer in 30 minutes.

The owner of a local souvenir shop in Murrells Inlet is in the process of preparing an income statement at the end of the first year of operation. Because it is the first year of operation, there was no inventory at the beginning of the year. Given the following information:

Merchandise Inventory - end of year $20,000
Purchases $100,000
Freight - in $4,000
Sales $200,000
Property Taxes - Store $8,000
Depreciation - Store $25,000
Insurance - Store $7,000
Salary - Sales Staff $20,000
Advertising $5,000


What is the Gross Margin?

Explanation / Answer

puchases 100,000
plus freight in 4000
less ending inventory 20,000
equals cost of goods sold: 84,000

sales 200,000
less cogs 84,000
equals gross margin of 116,000

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