Given ₦ - Net Profit ₦25,000, Cost of sales ₦25,000, Sales ₦85,000. Determine the total expenses.
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Correct Answer: Option B
Explanation:
To determine the total expenses, we can use the basic income statement formula:
Step 1: Calculate Gross Profit
\[
\text{Gross Profit} = \text{Sales} - \text{Cost of Sales}
= ₦85,000 - ₦25,000 = ₦60,000
\]
Step 2: Use Net Profit Formula
\[
\text{Net Profit} = \text{Gross Profit} - \text{Total Expenses}
\]
We are given:
- Net Profit = ₦25,000
- Gross Profit = ₦60,000
Solve for Total Expenses:
\[
\text{Total Expenses} = \text{Gross Profit} - \text{Net Profit}
= ₦60,000 - ₦25,000 = ₦35,000
\]
To determine the total expenses, we can use the basic income statement formula:
Step 1: Calculate Gross Profit
\[
\text{Gross Profit} = \text{Sales} - \text{Cost of Sales}
= ₦85,000 - ₦25,000 = ₦60,000
\]
Step 2: Use Net Profit Formula
\[
\text{Net Profit} = \text{Gross Profit} - \text{Total Expenses}
\]
We are given:
- Net Profit = ₦25,000
- Gross Profit = ₦60,000
Solve for Total Expenses:
\[
\text{Total Expenses} = \text{Gross Profit} - \text{Net Profit}
= ₦60,000 - ₦25,000 = ₦35,000
\]