During the current year, merchandise is sold for $2,450,000. The cost of the merchandise sold is $1,519,000.
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. $931,000 ($2,450,000 – $1,519,000)
b. 38% ($931,000 ÷ $2,450,000)
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.