**Problem Statement:**During the current year, merchandise is sold for $300,000 cash and for $625,000 on account. The cost of merchandise sold is $450,000. What is the amount of gross profit?**Options:**A. $925,000B. $475,000C. $175,000D. $450,000**Explanation:****Calculation of Gross Profit:**1. **Total Sales:** - Cash Sales: $300,000 - Credit Sales: $625,000 - **Total Sales = Cash Sales + Credit Sales = $300,000 + $625,000 = $925,000**2. **Cost of Goods Sold (COGS):** - COGS = $450,0003. **Gross Profit:** - Gross Profit = Total Sales - Cost of Goods Sold - Gross Profit = $925,000 - $450,000 = $475,000**Correct Answer:**B. $475,000

The gross profit is calculated by deducting the cost of goods sold from the sales revenues (Cash +…

Answered: During the current year, merchandise is…

During the current year, merchandise is sold for $300,000 cash and for $625,000 on account. The cost of merchandise sold is $450,000. What is the amount of gross profit?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

**Problem Statement:**

During the current year, merchandise is sold for $300,000 cash and for $625,000 on account. The cost of merchandise sold is $450,000. What is the amount of gross profit?

**Options:**

A. $925,000

B. $475,000

C. $175,000

D. $450,000

**Explanation:**

**Calculation of Gross Profit:**

1. **Total Sales:**
- Cash Sales: $300,000
- Credit Sales: $625,000
- **Total Sales = Cash Sales + Credit Sales = $300,000 + $625,000 = $925,000**

2. **Cost of Goods Sold (COGS):**
- COGS = $450,000

3. **Gross Profit:**
- Gross Profit = Total Sales - Cost of Goods Sold
- Gross Profit = $925,000 - $450,000 = $475,000

**Correct Answer:**

B. $475,000

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