The owner of a souvenir shop in Murrells Inlet is in the process of preparing an

Question

The owner of a souvenir shop in Murrells Inlet is in the process of preparing an income statement at the end of the first year of operation. Because it is the first year of operation, there was no inventory at the beginning of the year. Given the following information:

Merchandise Inventory-- year end $20,000
Purchases $100,000
Freight in $4,000
Sales $200,000
Property taxes-Store $8,000
Depreciation-Store $25,000
Insurance-Store $7,000
Salary-Sales Staff $20,000
Advertising $5,000




What is the "Gross-Margin"?
(Hint: Sketching out an income statement may help you arrive at this value)

Explanation / Answer

Gross Margin = Sales - cost of goods sold (COGS) Computation of COGS Beginning inventory 0 Add: Purchases 100,000 Add :Freight in 4,000 Less: Ending inventory 20,000 Cost of goods sold 84,000 Sales 200,000 Less:COGS 84,000 Gross Margin 116,000

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.