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A new firm commenced business on 1st January, 2006 and purchased goods costing Rs. 90,000 during the year. A sum of Rs. 6,000 was spent on freight inwards. At the end of the year the cost of goods still unsold was Rs. 12,000. Sales during the year Rs. 1,20,000. What is the gross profit earned by the firm?

  • a)
    Rs. 36,000

  • b)
    Rs. 30,000

  • c)
    Rs. 42,000

  • d)
    Rs. 38,000

Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
A new firm commenced business on 1st January, 2006 and purchased goods...
Given:
- Cost of goods purchased during the year = Rs. 90,000
- Freight inwards = Rs. 6,000
- Cost of goods unsold at the end of the year = Rs. 12,000
- Sales during the year = Rs. 1,20,000

To find: Gross profit earned by the firm

Formula:
Gross Profit = Sales - Cost of goods sold
Cost of goods sold = Cost of goods purchased + Freight inwards - Cost of goods unsold

Calculation:
- Cost of goods sold = Rs. (90,000 + 6,000 - 12,000) = Rs. 84,000
- Gross profit = Rs. (1,20,000 - 84,000) = Rs. 36,000

Therefore, the gross profit earned by the firm is Rs. 36,000 (Option A).
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Community Answer
A new firm commenced business on 1st January, 2006 and purchased goods...
GP = Sales - COGS
GP = 120000 - (purchases + freight - closing stock)
= 120000 - 96000 + 12000 = 36000
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A new firm commenced business on 1st January, 2006 and purchased goods costing Rs. 90,000 during the year. A sum of Rs. 6,000 was spent on freight inwards. At the end of the year the cost of goods still unsold was Rs. 12,000. Sales during the year Rs. 1,20,000. What is the gross profit earned by the firm?a)Rs. 36,000b)Rs. 30,000c)Rs. 42,000d)Rs. 38,000Correct answer is option 'A'. Can you explain this answer?
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