Lopez Sales Company had the following balances in its accounts on January 1, 201

Question

Lopez Sales Company had the following balances in its accounts on January 1, 2018: Cash Merchandise Inventory Land Common Stock Retained Earnings $42,900 36,000 50,000 70,808 58,000 Lopez experienced the following events during 2018: 1. Sold merchandise inventory that cost $22,000 for $40,500. 2. Sold land that cost $30,000 for $46,000 Required a. Determine the amount of gross margin recognized by Lopez. b. Determine the amount of the gain on the sale of land recognized by Lopez. a Gross margin b Gain on sale of land

Explanation / Answer

1) Calculate gross margin :

Gross margin = Sales-Cost of goods sold

= 40500-22000

Gross margin = 18500

Gain on sale of land = 46000-30000 = 16000

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