Question

Ballard Company uses the perpetual inventory system. The company purchased $9,700 of merchandise from Andes Company under the terms 3/10, net/30. Ballard paid for the merchandise within 10 days and also paid $420 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $18,400 cash. The amount of gross margin for this merchandise is:a. $8,280. b. $9,700. c. $8,571.d. $8,700.

Answer 1

Answer:

c. $ 8,571

Explanation:

Computation of gross margin

Purchase cost                                              $  9,700

Less: Discount availed 3 %                         $  (  291)

Net purchases                                             $  9,409

Add: Freight                                                 $     420

Total cost of merchandise                         $  9,829

Sales value                                                   $ 18,400

Gross margin on merchandise sales        $   8,571