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14 January, 04:49

A company has the following account balances: Sales revenue $2,000,000: Sales Returns and Allowances $250,000: Sales Discounts $50,000: and Cost of Goods Sold $1,275,000. How much is the gross profit rate?

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  1. 14 January, 05:14
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    0.25 or 25%

    Explanation:

    The computation of the gross profit rate is shown below:

    Gross profit rate = Gross profit : Net sales revenue

    where,

    Net sales revenue = Sales revenue - Sales Returns and Allowances - Sales Discounts

    = $2,000,000 - $250,000 - $50,000

    = $1,700,000

    And, the Cost of goods sold is $1,275,000

    So, the gross profit is

    = $1,700,000 - $1,275,000

    = $425,000

    So, the gross profit rate is

    = $425,000 : $1,700,000

    = 0.25 or 25%
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