Question

ABC Inc is a merchandising business that sells clothing to adults 1) ABC borrowed $90,000 from the bank to start the business 2) Purchased $50,000 inventory for cash. 3) Inventory costing $26,000 was sold for $50,000 cash 4) Paid $8,000 cash for operating expenses What is revenue, expenses, gross profit and net profit for ABC based on information above.

Answer 1

Revenue	$50,000
(Less): Cost of goods sold	($26,000)
Gross profit	$24,000
(Less): Operating expenses	($8,000)
Net profit	$16,000

Revenue = $50,000

Expenses = $34,000

Gross Profit = $24,000

Net Profit = $16,000

Answer 2

Here's how to break down the calculations to find the revenue, expenses, gross profit, and net profit for ABC Inc.:

1. Revenue

• Revenue is the total income generated from sales.

• ABC sold inventory for $50,000.

  Revenue = $50,000

2. Cost of Goods Sold (COGS)

• COGS is the direct cost of producing the goods sold by a company.

• The inventory sold had a cost of $26,000.

  COGS = $26,000

3. Gross Profit

• Gross Profit is the profit a company makes after deducting the costs associated with producing and selling its products.¹

  Gross Profit = Revenue - COGS

  Gross Profit = $50,000 - $26,000

  Gross Profit = $24,000

4. Operating Expenses

• Operating Expenses are the expenses a business incurs through its normal business operations.

• ABC paid $8,000 for operating expenses.

  Operating Expenses = $8,000

5. Net Profit (or Net Income)

• Net Profit is the profit remaining after all operating expenses have been deducted from gross profit.

  Net Profit = Gross Profit - Operating Expenses

  Net Profit = $24,000 - $8,000

  Net Profit = $16,000

Summary

• Revenue: $50,000

• Expenses: $26,000 (COGS) + $8,000 (Operating Expenses) = $34,000

• Gross Profit: $24,000

• Net Profit: $16,000