Assume Amazon Corporation uses the perpetual inventory method. 1) Amazon Corpora

ID: 2404228 • Letter: A

Question

Assume Amazon Corporation uses the perpetual inventory method.

1) Amazon Corporation purchased merchandise inventory that cost $16,900 under terms of 3/10, n/30 and FOB shipping point.

2) The company paid freight cost of $690 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 $25,300 cash and delivered under terms FOB shipping point with freight cost amounting to $490.

The gross margin from the above transactions of Amazon Company is

A. $8,907.

B. $8,417.

C. $8,217.

D. $7,727.

Correct answer is C. $8,217 Gross margin = Sales - Cost of goods sold = $25,300 - [($16,900 X 0.97) + $690] = $25,300 - [$16,393 + $690] = $8,217

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