Markup and margins

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December 4, 2014 at 3:51 pm #217423
Koey
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The draft account of Anthea Co. for the year end 31 December 20X9 include the following:
Revenue $80000
Gross Profit $20000
It was subsequently discovered that revenue has been understated by $10000 and closing inventory overstated by $5000. After correction of these errors the gross profit percentage will be
ans is 27.8%
Please explain how to come up the answer.
Thanks!!
December 4, 2014 at 5:02 pm #217514
John Moffat
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Revenue increases by 10,000 to 90,000.
Gross profit will also increase by 10,000 (because of extra revenue) and will also decrease by 5,000 (because of closing inventory). So profit will be 20,000 + 10,000 – 5,000 = 25,000.
So gross profit percentage = 25000/90000 = 27.8%
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