Question

Zhang Co. purchased $2,000 of inventory on account. This inventory was sold for $3,000 cash. The amount of gross margin reported on the income statement and the amount of net cash inflow from operating activities reported on the statement of cash flows would be?

Answer 1

Answer: $1000

Step-by-step explanation:

Hi, the gross margin is equal to the sales revenues minus the cost of the goods sold.

Revenues: inventory sold for $3000

Cost: $2000 Purchase of inventory

So, in this case we have to subtract $2000 (cost) to $3000 (revenue)

Mathematically speaking:

$3000- $2000 = $1000

Feel free to ask for more if needed or if you did not understand something.