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Use the following financial information to find the entry you would make on an income statement...

Use the following financial information to find the entry you would make on an income statement for GROSS MARGIN for the year ended December 31, 2011: Gross Sales, $241,000; Sales Returns and Allowances, $7,500; Sales Discounts, $7,800; Merchandise Inventory, January 1, 2011, $45,200; Merchandise Inventory, December 31, 2011, $71,300; Net Purchases, $91,900; Freight In, $1950; Salaries, $97,000; Rent, $30,600; Utilities, $2,500; Insurance, $2,450; and Income Tax, $19,350.

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Answer #1

Gross margin = Net sales - Cost of goods sold

Net sales = Gross Sales - Sales Returns and Allowances - Sales discounts

Net sales = 241,000 - 7,500 - 7,800 = 225,700

Cost of goods sold = Opening Stock + Net purchases + Freight in - Closing stock

Cost of goods sold = 45,200 + 91,900 + 1,950 - 71,300 = 67,750

Gross margin = 225,700 - 67,750 = $157,950

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