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1 January, 21:31

The following information is available for Sweden Company for its most recent year:

Net sales $1,800,000

Freight-in 45,000

Purchase discounts 25,000

Ending inventory 120,000

The gross margin is 40% of net sales. What is the cost of goods available for sale?

A $1,200,000

B $1,220,000

C $960,000

D $840,000

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Answers (1)
  1. 1 January, 21:49
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    A $1,200,000

    Explanation:

    The correct answer is D.

    the gross margin equals 40% of net sales = 40% * 1,800,000 = 720,000

    Cost of goods sold will therefore be 60% of net sales;

    Cost of goods sold = (60% * 1,800,000) = 1,080,000.

    Cost of goods available for sale = cost of goods sold + the cost of ending inventory.

    Cost of goods available for sale = 1,080,000+120,000 = $1,200,000
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