Answer :
* Calculate Purchases: Total payments to suppliers + Amount owing to suppliers = $60,000 + $5,000 = $65,000.
* Calculate COGS: Purchases - Closing inventory = $65,000 - $15,000 = $50,000.
* Calculate Sales: Total receipts from customers + Amount owed by customers = $85,000 + $10,000 = $95,000.
* Calculate Gross Profit: Sales - COGS = $95,000 - $50,000 = $45,000.
The gross profit for the year is $\boxed{$45,000}$.
### Explanation
1. Understanding the Problem
We are given the following information:
* Closing inventory: $15,000
* Total payments to suppliers: $60,000
* Amount owing to suppliers: $5,000
* Total receipts from customers: $85,000
* Amount owed by customers: $10,000
We need to calculate the gross profit for the year.
2. Calculating Purchases
First, we need to calculate the purchases. Purchases equal total payments to suppliers plus the amount owing to suppliers at the end of the year. Since this is the first year of trading, we assume the amount owing to suppliers at the beginning of the year is $0.
$$\text{Purchases} = \text{Total payments to suppliers} + \text{Amount owing to suppliers}$$
$$\text{Purchases} = $60,000 + $5,000 = $65,000$$
3. Calculating Cost of Goods Sold (COGS)
Next, we calculate the cost of goods sold (COGS). COGS equals purchases minus the closing inventory.
$$\text{COGS} = \text{Purchases} - \text{Closing inventory}$$
$$\text{COGS} = $65,000 - $15,000 = $50,000$$
4. Calculating Sales
Now, we calculate the sales. Sales equal total receipts from customers plus the amount owed by customers at the end of the year. Since this is the first year of trading, we assume the amount owed by customers at the beginning of the year is $0.
$$\text{Sales} = \text{Total receipts from customers} + \text{Amount owed by customers}$$
$$\text{Sales} = $85,000 + $10,000 = $95,000$$
5. Calculating Gross Profit
Finally, we calculate the gross profit. Gross profit equals sales minus COGS.
$$\text{Gross Profit} = \text{Sales} - \text{COGS}$$
$$\text{Gross Profit} = $95,000 - $50,000 = $45,000$$
6. Final Answer
Therefore, the gross profit for the year is $45,000.
### Examples
Understanding gross profit is crucial for business owners. For instance, imagine a bakery owner wants to assess their business's financial health. By calculating the gross profit, they can determine if their pricing strategy is effective and if their production costs are manageable. A healthy gross profit margin allows the bakery to cover operating expenses, invest in growth, and remain profitable. This calculation provides a clear picture of the bakery's efficiency in turning ingredients into revenue, guiding decisions on pricing, cost control, and overall business strategy.
* Calculate COGS: Purchases - Closing inventory = $65,000 - $15,000 = $50,000.
* Calculate Sales: Total receipts from customers + Amount owed by customers = $85,000 + $10,000 = $95,000.
* Calculate Gross Profit: Sales - COGS = $95,000 - $50,000 = $45,000.
The gross profit for the year is $\boxed{$45,000}$.
### Explanation
1. Understanding the Problem
We are given the following information:
* Closing inventory: $15,000
* Total payments to suppliers: $60,000
* Amount owing to suppliers: $5,000
* Total receipts from customers: $85,000
* Amount owed by customers: $10,000
We need to calculate the gross profit for the year.
2. Calculating Purchases
First, we need to calculate the purchases. Purchases equal total payments to suppliers plus the amount owing to suppliers at the end of the year. Since this is the first year of trading, we assume the amount owing to suppliers at the beginning of the year is $0.
$$\text{Purchases} = \text{Total payments to suppliers} + \text{Amount owing to suppliers}$$
$$\text{Purchases} = $60,000 + $5,000 = $65,000$$
3. Calculating Cost of Goods Sold (COGS)
Next, we calculate the cost of goods sold (COGS). COGS equals purchases minus the closing inventory.
$$\text{COGS} = \text{Purchases} - \text{Closing inventory}$$
$$\text{COGS} = $65,000 - $15,000 = $50,000$$
4. Calculating Sales
Now, we calculate the sales. Sales equal total receipts from customers plus the amount owed by customers at the end of the year. Since this is the first year of trading, we assume the amount owed by customers at the beginning of the year is $0.
$$\text{Sales} = \text{Total receipts from customers} + \text{Amount owed by customers}$$
$$\text{Sales} = $85,000 + $10,000 = $95,000$$
5. Calculating Gross Profit
Finally, we calculate the gross profit. Gross profit equals sales minus COGS.
$$\text{Gross Profit} = \text{Sales} - \text{COGS}$$
$$\text{Gross Profit} = $95,000 - $50,000 = $45,000$$
6. Final Answer
Therefore, the gross profit for the year is $45,000.
### Examples
Understanding gross profit is crucial for business owners. For instance, imagine a bakery owner wants to assess their business's financial health. By calculating the gross profit, they can determine if their pricing strategy is effective and if their production costs are manageable. A healthy gross profit margin allows the bakery to cover operating expenses, invest in growth, and remain profitable. This calculation provides a clear picture of the bakery's efficiency in turning ingredients into revenue, guiding decisions on pricing, cost control, and overall business strategy.
