At the beginning of the year, Wildcat Athletic had an inventory of $300000. During the year, the company purchased goods costing $1200000. If Wildcat Athletic reported ending inventory of $450000 and sales of $1500000, their cost of goods sold and gross profit rate would be:
a) $1050000 and 70%.
b) $1050000 and 30%.
c) $750000 and 70%.
d) $750000 and 30%.
Cost of Goods Sold and Gross Profit Rate:
The cost of goods sold expense is the first expense item on the income statement of a trading company, and it is used to calculate the gross profit amount. When the gross profit amount is expressed as a percentage of sales revenue, it is called to gross profit rate or gross profit margin.
Answer and Explanation:
The cost of goods sold is:
|Goods available for sale||$1,500,000|
|Cost of Goods Sold||$1,050,000|
The gross profit rate is:
|Cost of Goods Sold||(1,050,000)|
|Gross Profit Rate||30%
($450,000 / $1,500,000)
The correct option is b)
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from Financial Accounting: Help and ReviewChapter 5 / Lesson 17