Abbey Co. sold merchandise to Gomez Co. on account, $29,300, terms 2/15, net 30. The cost of the goods sold is $20,510. Abbey Co. issued a credit memo for $2,500 for merchandise returned that originally cost $1,800. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions?

Note that after sales of goods of $29,300 whose cost is $20,510 to Gomez Co, Gomez returned goods whose selling price is $2,500 and cost originally $1,800 to Abbey Co.

The implication of such goods returned is that $2,500 would be deducted from selling price and $1,800 would be deducted from cost of goods sold.

selling price=$29,300-$2,500

selling price=$26,800.00

cost of goods sold=$20,510-$1,800

cost of goods sold=$18,710.00

Note again that Gomez paid the invoice within the discount period, which means that net sales is the selling price of $26,800.00 minus 2% discount(2/15 means a discount of 2% is available if credit sales is settled in cash within the first 15 days of making sales0

net sales=$26,800.00*(1-2%)

net sales=$26,264.00

The gross profit is net sales minus the cost of goods sold

gross profit= $26,264.00-$18,710.00

gross profit=$7,554.00

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