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If the closing inventory is valued at $10,000 and the cost of goods sold is $40,

Practice Questions

Q1
If the closing inventory is valued at $10,000 and the cost of goods sold is $40,000, what is the gross profit if sales are $60,000?
  1. $20,000
  2. $10,000
  3. $30,000
  4. $50,000

Questions & Step-by-Step Solutions

If the closing inventory is valued at $10,000 and the cost of goods sold is $40,000, what is the gross profit if sales are $60,000?
  • Step 1: Identify the total sales amount, which is $60,000.
  • Step 2: Identify the cost of goods sold (COGS), which is $40,000.
  • Step 3: Use the formula for gross profit: Gross Profit = Sales - Cost of Goods Sold.
  • Step 4: Substitute the values into the formula: Gross Profit = $60,000 - $40,000.
  • Step 5: Calculate the result: $60,000 - $40,000 = $20,000.
  • Step 6: The gross profit is $20,000.
  • Gross Profit Calculation – Gross Profit is determined by subtracting the Cost of Goods Sold (COGS) from Sales revenue.
  • Inventory Valuation – Understanding that closing inventory does not directly affect the gross profit calculation in this context.
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