Sanchez Company Engaged in the Following Transactions During Year 1

question 134

Multiple Choice

Sanchez Company engaged in the following transactions during Year 1: 1) Started the business by issuing $13,900 of common stock for cash.2) The company paid cash to purchase $8,300 of inventory.3) The company sold inventory that cost $5,700 for $11,900 cash.4) Operating expenses incurred and paid during the year, $5,200.Sanchez Company engaged in the following transactions during Year 2:1) The company paid cash to purchase $12,200 of inventory.2) The company sold inventory that cost $9,900 for $18,500 cash.3) Operating expenses incurred and paid during the year, $6,200.Note: Sanchez uses the perpetual inventory system. What is Sanchez's gross margin for Year 2?

• A)$9,900
• B)$6,300
• C)$2,400
• D)$8,600

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Definitions:

Self-Employment Tax

A levy that encompasses Social Security and Medicare contributions, mainly targeted at individuals who are self-employed.

Pharmaceutical Company

A business involved in the research, development, manufacturing, and distribution of medications.

Self-Employment Income

Self-Employment Income refers to earnings derived from one’s own business, professional practice, or freelance work, as opposed to earning a salary or wages from an employer.

MACRS

The Modified Accelerated Cost Recovery System, a method of depreciation in the U.S. for tax purposes, allowing for accelerated asset expense deductions over time.