The following is a listing of some of the balance sheet accounts and all of the income statement accounts for Northview Company as they appear on the company’s adjusted trial balance.

Accounts Payable $10,000
Accounts Receivable 11,000
Inventory 20,000
Advertising Expense 12,000
Cost of Goods Sold 89,000
Delivery Expense 6,000
Income Tax Expense 2,000
Insurance Expense 1,000
Rent Expense 12,000
Sales Revenue 160,000
Sales Discounts 11,000
Sales Returns & Allowances 19,000

Use the information above to answer the following question. The gross profit percentage would be closest to: %

A) 25.6%

B) 31.5%

C) 55.6%

D) 68.5%

The gross profit margin is B. 31.5%.

Explanation:

The gross profit is the profit earned by a company from trading and is also known as the trading profit. It is the difference between the Net sales revenue and the cost of goods sold. This profit does not take into account any other expenses either operating or non operating except for the cost of goods sold.

The net sales revenue = Gross sales revenue - Sales returns and allowances - sales discounts

Net sales revenue = 160000 - 19000 - 11000 = 130000

The cost of goods sold are $89000

The gross profit = 130000 - 89000 = $41000

The gross profit percentage = (Gross profit / net sales)  * 100

Gross profit margin = (41000 / 130000) * 100 = 31.5%

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