As the accountant of Race Co., you have been requested to calculate (a) net sales, (b) cost of merchandise sold, (c) gross profit, and (d) net income from the following: gross sales, $40,000; sales returns, $3,000; beginning inventory, $6,000; net purchases, $8,000; ending inventory, $1,000; operating expenses, $9,200.

(a) Net sales = Gross sales - Sales return

Net sales = $40,000 - $3,000 = $37,000

(b) Cost of merchandise sold = Beginning inventory + Net purchase - Ending inventory

Cost of merchandise sold = $6,000 + $8,000 - $1,000 = $13,000

(c) Gross profit = Net sales - Cost of merchandise sold

Gross profit = $37,000 - $13,000 = $24,000

(d) Net income = Gross profit - Operating expenses

Net income = $24,000 - $9,200 = $14,800

B : $19,975.40

Explanation:  

The computation of the original investment is shown below:

Year          Cash flows             Discount rate at 12%          Present value

1                 $10,000                  0.8926                              $8,928.57

2                $8,500                    0.79719                            $6,776.15

3                $6,000                    0.71178                             $4,270.68

Total present value                                                           $19,975.40

In the case of IRR, the total of present value would be equivalent to the orginal investment