Alpha Hardware sells on the instalment plan.Sales-related figures for Alpha hardware for 2017 were as follows: sales,$700 000;down payments on the sales,$70 000;collections on instalments $300 000;beginning inventory,$50 000;ending inventory,$40 000;and purchases,$410 000.What is Alpha Hardware's gross profit for 2017 using the instalment method?
A)$370 000
B)$280 000
C)($50 000)
D)$148 000

Question

Quizplus · Accepted Answer

Using the instalment method, gross profit is determined as (collections on instalments - cost of goods sold), where cost of goods sold is determined as (beginning inventory + purchases - ending inventory). 
Therefore, gross profit = ($300,000 - ($50,000 + $410,000 - $40,000)) = $280,000. 
Therefore, the correct answer is B.

Alpha Hardware Sells on the Instalment Plan