During the current year, merchandise is sold for $31,850,000. The cost of the merchandise sold is $24,206,000.
a. What is the amount of the gross profit?
b. Compute the gross profit percentage (gross profit divided by sales).
c. Will the income statement necessarily report a net income? Explain.
Answer:
a. $7,644,000 ($31,850,000 – $24,206,000)
b. 24% ($7,644,000 ÷ $31,850,000)
c. No. If operating expenses are less than gross profit, there will be a net income. On the other hand, if operating expenses exceed gross profit, there will be a net loss.
