Given the information below, what is the company's gross profit?

Question

Given the information below, what is the company's gross profit?

 

Accounts Receivable $ 50,000

Ending Inventory 100,000

Cost of Goods Sold 250,000

Sales Returns 20.000

 

A. $250,000.

 

B. $70,000.

 

C. $220,000.

 

D. $50,000.

Answer 1

gross revenues - returns - cost of goods = Gross profit

 

In the data provided above, the gross revenues were omitted.

 

So, since we know the returns, and the cost of sales, the Accounts Receivable will equal the gross profit, because the AR value represents unpaid sales.

 

Therefore, the gross profit is the AR value, or $50,000, which is option D.