Use the following information for questions 99 - 101.
During 2014, Martin Corporation sold merchandise costing $3,500,000 on an installment basis for $5,000,000. The cash receipts related to these sales were collected as follows: 2014, $2,000,000; 2015, $1,750,000; 2016, $1,250,000.
-What is the rate of gross profit on the installment sales made by Martin Corporation during 2014?
A) 30%
B) 40%
C) 60%
D) 70%

Question

Quizplus · Accepted Answer

Gross profit is calculated as the selling price minus the cost of goods sold. The selling price of the merchandise sold on an installment basis was $5,000,000 and the cost of goods sold was $3,500,000. Therefore, the gross profit is $1,500,000. To calculate the rate of gross profit, we divide the gross profit by the selling price: $1,500,000/$5,000,000 = 0.30 or 30%.

Use the Following Information for Questions 99 - 101