The following data relate to Gorr Company for the year ended December 31, 2010.

Question

The following data relate to Gorr Company for the year ended December 31, 2010. Gorr Company uses the accrual basis.

Sales for cash $200,000
Sales for credit 220,000
Cost of inventory sold 180,000
Collections from customers 300,000
Purchases of inventory on credit 190,000
Payment for purchases 180,000
Selling expenses (accrual basis) 50,000
Payment for selling expenses 60,000
Which of the following represents income for Gorr Company for the year ended December 31, 2010?

1. $190,000

2. $185,000

3. $180,000

4. $200,000

5. none of the answers are correct

Explanation / Answer

Answer: 1. 190,000 Sales (credit and cash) 420,000 Less cost of inventory sold 180,000 Equals gross profit 240,000 Less selling expense 50,000 Equals net income 190,000

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