Gomez Company had a gross profit of $360,000, total purchases of $420,000, and an ending inventory of $240,000 in its first year of operations as a retailer.Gomez's sales in its first year must have been
A)$540,000.
B)$660,000.
C)$180,000.
D)$600,000.

Question

Quizplus · Accepted Answer

Gross profit is calculated as Sales - Cost of Goods Sold (COGS). COGS is calculated as Beginning Inventory + Purchases - Ending Inventory. Since it's the first year, Beginning Inventory is $0. Thus, COGS = $0 + $420,000 - $240,000 = $180,000. Therefore, Sales = Gross Profit + COGS = $360,000 + $180,000 = $540,000.

Gomez Company Had a Gross Profit of $360,000, Total Purchases