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Cannondale transaction effect:Cost of Sales&Operating Income

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1. On the balance sheet of one of Cannondale's customers, the Burgess Company dated December 31, 20x0, the merchandise inventory account balance was $5,000.

During 20x1, Burgess had sales of $100,000 and purchased inventory costing $15,000. Burgess' gross profit percentage is 25%. What amount will Burgess report as Cost of Sales for the year ending December 31, 20x1?

$100,000
$75,000
$15,000
$25,000

2. The following information was reported on the income statement of Cannondale in one of its early years of operation. Sales revenues, $450,000; Cost of goods sold, $200,000; Selling, general, and administrative, $150,000; Interest expense, $30,000. Cannondale's gross profit and operating income would be:

Gross profit Operating income

$100,000 $70,000
$250,000 $70,000
$300,000 $70,000
$250,000 $100,000

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Solution Summary

The solution provides step by step method for the calculation of Gross profit and Operating income. Formula for the calculation is also included.

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Answers

1. $75,000

Hint:

Gross profit percentage = 25%

Therefore, gross profit = 100,000 * 25% = ...

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