The following balances were extracted from the books of Adama Ltd on 31st August 2007
| # | |
|
Sales |
200000 |
|
Drawings |
10000 |
|
Land and building |
70000 |
|
Furniture |
10000 |
|
Debtors |
50000 |
|
Creditors |
35000 |
|
Capital |
85000 |
|
Bank |
10000 |
|
General expenses |
10000 |
|
Stock ( 31-08-2007) |
10000 |
|
Purchases |
140000 |
|
Stock (1-09- 2006) |
20000 |
The gross profit is
- #40,000
-
#50,000
- #70,000
- #60,000
The correct answer is: B
Explanation
Calculate the Cost of Goods Sold (COGS):
-
COGS = Opening Stock (1-09-2006) + Purchases - Closing Stock (31-08-2007)
COGS = # 20,000 + #140,000 - #10,000
=
COGS #150,000
Calculate the Gross Profit:
Gross Profit = Sales - COGS
Gross Profit = # 200,000 - #150,000
Gross Profit = #50,000