Calculating purchases using gross profit and inventory for first-year trading

Steps:

• Gross profit = 20% × sales = 0.20 × $55,000 =$11,000.
• Cost of goods sold (COGS) = sales − gross profit = $55,000 −$11,000 = $44,000.
• Opening inventory = $0 (first year of trading).
• Purchases = COGS + closing inventory − opening inventory = $44,000 +$2,000 − $0 =$46,000.

Why D is correct:

• Not applicable; calculation yields $46,000 using standard gross profit margin formula (GP/Sales = 20%) and inventory equation (COGS = opening + purchases − closing).

Why the others are wrong:

• A, B, C all underestimate purchases by ignoring full COGS adjustment for first-year inventory.

Not enough information to match options; likely question error in numbers.

Final answer: None