CP 5–1

Consider the following information of Jones Corporation over four years:

2022 2021 2020 2019

Sales $10,000 $9,000 $8,000 $7,000
Cost of goods sold $7,500 ($6,840) ($6,160) $5,460
Gross profit $2,500 $2,160 $1,840 $1540
Gross profit percentage 25% 24% 23% 22%

Required:
1. Calculate the missing amounts for each year.
2. What does this information indicate about the company?
Solutions

2022:

Cost of goods sold =Sales- Gross profit

=$10,000- $2,500

Cost of goods sold= $7,500

Gross profit percentage= (Gross profit/ Total sales) *100

= ($2,500/$10,000) *100

Gross profit percentage= 25%

2021:

Gross profit = Sales- Cost of goods sold

= $9,000-$6,840

Gross profit= $2,160

Gross profit percentage= (Gross profit/ Total sales) *100

= ($2,160/$9,000) *100

Gross profit percentage= 24%

2020:
Sales = Gross profit+ Cost of goods sold

= $1,840+$6,160

Sales= $8,000

Gross profit percentage= (Gross profit/ Total sales) *100

= ($1,840/$8,000) *100

Gross profit percentage= 23%

2019:

Gross profit = Sales* Gross profit percentage

Gross profit= $7,000*22%

Gross profit= $1,540

Sales- Gross profit= Cost of goods sold

= $7,000- $1,540

Cost of goods sold= $5,460