Question

On January 1, 2017, Christel Madan Corporation had inventory of $56,000. At December 31, 2017, Christel Madan had the following account balances.
Freight-in $ 4,100
Purchases 505,500
Purchase discounts 7,250
Purchase returns and allowances 3,500
Sales revenue 810,000
Sales discounts 5,100
Sales returns and allowances 12,000

At December 31, 2017, Christel Madan determines that its ending inventory is $66,000.

Compute Christel Madan’s 2017 gross profit.


Gross profit?

Compute Christel Madan’s 2017 operating expenses if net income is $142,000 and there are no nonoperating activities.


Operating expenses?

Answer 1

Answer:

Gross Profit = $304,050

Operating expenses = $162,050

Explanation:

The computation of gross profit and operating expenses is shown below:-

Net purchases = Purchase - Purchase discounts - Purchase returns and allowances

= $505,500 - $7,250 - $3,500

= $494,750    

Cost of goods sold = Net purchases + Freight-in + Inventory + Ending inventory

= $494,750 + $4,100 + $56,000 - $66,000

= $488,850    

Gross profit = Net sales - Cost of goods sold

= ($810,000 - $5,100 - $12,000) - $488,850

= $304,050

Operating expenses = Gross profit - Net income

= $304,050 - $142,000

= $162,050