A Company Has Net Sales of $825,000 and Cost of Goods

question 90

Multiple Choice

A company has net sales of $825,000 and cost of goods sold of $547,000. Its net income is $98,500. The company's gross margin and operating expenses, respectively, are:

• A) $179,500 and $98,500
• B) $645,500 and $179,500
• C) $209,000 and $191,470
• D) $278,000 and $98,500
• E) $278,000 and $179,500

Identify how specific transactions affect gross profit when different inventory costing methods are applied.

Evaluate the considerations for selecting between FIFO and average cost formulas regarding the physical flow of goods and financial reporting.

Understand the impact of different inventory cost formulas on financial statements and inventory valuation.

Analyze how inventory errors affect financial statements and understand the correction methods.

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Definitions:

Adjusted Gross Income

An individual's total gross income minus specific deductions, used to determine taxable income.

Itemized Deductions

Specific expenses listed on a taxpayer's return that can reduce taxable income, such as mortgage interest and medical expenses.

High-Income Taxpayers

Individuals who earn income above a certain threshold, which subjects them to higher tax rates.

Limitation

A restriction or cap, especially in the context of deductions or benefits in tax terminology.