Assume the perpetual inventory method is used. 1) Green Company purchased mercha

Question

Assume the perpetual inventory method is used.

1) Green Company purchased merchandise inventory that cost $16,400 under terms of 2/10, n/30 and FOB shipping point.

2) The company paid freight cost of $640 to have the merchandise delivered.

3) Payment was made to the supplier within 10 days.

4) All of the merchandise was sold to customers for $24,300 cash and delivered under terms FOB shipping point with freight cost amounting to $440.

The gross margin from these transactions of Green Company is

1. $7,148.

2. $8,228.

3. $7,588.

4. $7,788.

Explanation / Answer

Calculate gross margin :

So answer is 3) $7588

Purchase cost 16400 Freight cost 640 Purchase discount (16400*2%) -328 Net cost of purchase 16712 Less:Sales revenue 24300 Gross margin 7588

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