Prior to taking a physical inventory at year-end, the perpetual inventory records of Athena Designs showed an inventory of $26,000, sales of $358,000, and a cost of goods sold of $215,000. The year-end physical inventory indicated merchandise on hand costing $24,000. The company's gross profit for the year was:
A) $334,000.
B) $145,000.
C) $141,000.
D) Some other amount.

Question

Quizplus · Accepted Answer

To find the gross profit, we need to first calculate the cost of goods sold. We can do that using the perpetual inventory method:

Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold
$26,000 + Purchases - $24,000 = $215,000
Purchases = $213,000

Next, we can find the gross profit by subtracting the cost of goods sold from the sales:

Gross Profit = Sales - Cost of Goods Sold
Gross Profit = $358,000 - $215,000
Gross Profit = $143,000

Therefore, the company's gross profit for the year was $141,000 (choice C).

Prior to Taking a Physical Inventory at Year-End, the Perpetual