On April 6, Year 1, Gringot Company purchased $140,000 of merchandise inventory. Terms of the purchase included a discount of 3/20, n/30 and the freight terms were FOB destination. Freight costs amounted to $4,600. Gringot paid the account payable on April 24. Gringot sold all inventory for $189,500.Required: Determine the amount of gross margin Gringot would report on the income statement.
What will be an ideal response?
$53,500 (see below)
Step 1: $140,000 - ($140,000 × 3%) = $135,800 Cost of goods sold
Step 2: $189,500 Sales - $135,800 COGS = $53,700 Gross margin
Note: FOB destination indicates that the seller pays the freight costs.
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