Question

Abbey Co. sold merchandise to Gomez Co. on account, $34,600, terms 2/15, net 45. The cost of the goods sold was $15,841. Abbey Co. issued a credit memo for $4,200 for merchandise returned that originally cost $1,108. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions

Answer 1

Answer:

$15,059

Explanation:

Given that,

Sales on account = $34,600

Cost of the goods sold = $15,841

Issued credit memo for merchandise returned = $4,200

Cost of issuing credit memo = $1,108

Net sales = Sales - Issued credit memo for merchandise returned

                = $34,600 - $4,200

                = $30,400

Merchandise cost:

= Cost of the goods sold - Cost of issuing credit memo

= $15,841 - $1,108

= $14,733

Gross profit;

= Net sales - Merchandise cost - Discount allowed

= $30,400 - $14,733 - ($30,400 × 2%)

= $30,400 - $14,733 - $608

= $15,059