Ted's Used Cars uses the specific identification method of costing inventory. During March, Ted purchased three cars for $6,000, $7,500, and $9,750, respectively. During March, two cars are sold for $9,000 each. Ted determines that at March 31, the $9,750 car is still on hand. What is Ted's gross profit for March?
A) $5,250.
B) $4,500.
C) $750.
D) $8,250.

Question

Quizplus · Accepted Answer

Using the specific identification method, we know that the cost of the two cars sold in March are $6,000 and $7,500 respectively. Therefore, the gross profit for those two cars is ($9,000 - $6,000) + ($9,000 - $7,500) = $4,500. The remaining car on hand (the $9,750 car) does not contribute to the gross profit calculation. Therefore, the correct answer is B) $4,500.

Ted's Used Cars Uses the Specific Identification Method of Costing