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At the beginning of the year, Wildcat Athletic had an inventory of $300000. During the year, the...

Question:

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:

Beginning inventory $300,000
Purchases 1,200,000
Goods available for sale $1,500,000
Ending inventory (450,000)
Cost of Goods Sold $1,050,000


The gross profit rate is:

Sales Revenue $1,500,000
Cost of Goods Sold (1,050,000)
Gross Profit $450,000
Gross Profit Rate 30%
($450,000 / $1,500,000)


The correct option is b)


Learn more about this topic:

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How to Calculate Gross Profit Margin: Definition & Formula

from Financial Accounting: Help and Review

Chapter 5 / Lesson 17
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