Ballard Company uses the perpetual inventory system. The company purchased $16,000 of merchandise from Andes Company under the terms 2/10, net/30. Ballard paid for the merchandise within 10 days and also paid $500 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $30,000 cash. The amount of gross margin for this merchandise is:

$13,820

Explanation:

The computation of the gross margin is shown below;

As we know that

Gross margin = Sales revenue - cost of goods sold

where,  

Sales revenue is $30,000

And, the cost of goods sold is  

= Purchase - purchase discount + freight charges

where,  

Purchase is $16,000

Purchase discount = $16,000 × 2% = $320

And, the freight charges = $500

So, the cost of goods sold is  

= $16,000 - $320 + $500

= $16,180

So, the gross profit is  

= $30,000 - $16,180

= $13,820