The bike sale(s)

Algebra Level 1

A bike store buys a bike for $90 and sells it for $100.

A month later, they buy it back for $110 and sell it for $120.

How much total profit did the store make, in dollars, on this set of transactions?

The answer is 20.

2 solutions

Denton Young
Oct 16, 2017

They made 10 dollars profit on the first transaction and an additional 10 dollars on the second, which adds up to 20 dollars.

Shouldn't it be 10 dollars? In the first case he gains 10 dollars. In the second case they buy it back and lose 10 dollars in the process of getting it back. Then he agains earnd 10 dollar profit when he sells for 120 dollars.

Aman thegreat - 3 years, 7 months ago

Here's another way to look at it.

The total cost to the store in the two transactions was $90 (first time) + $110 (2nd time) = 200.

The total taken in by the store was $100 (first time) + $120 (2nd time) = $220.

Profit = amount taken in - amount paid out = 220 - 200 = 20 dollars.

Or you could view it this way: let's suppose the second transaction had been for a DIFFERENT bike, and they'd bought it for $110 and sold it for $120. Clearly whether it was two transactions with one bike or two transactions with two bikes makes no difference regarding the profit, as long as the amount of money taken in and going out is the same. Then they would make a $10 profit on the first bike and a $10 profit on the second bike for a total of $20 profit.

Denton Young - 3 years, 7 months ago

Is my interpretation wrong?

Aman thegreat - 3 years, 7 months ago

@Aman Thegreat – I'll take it step by step.

The definition of "profit" for a store is amount taken in minus amount spent.

On the first transaction, they gained $10. We both agree there.

That transaction is now over. There is now a second transaction.

On the second transaction, the took in 120 dollars and paid out 110 dollars. 120 minus 110 = 10. Therefore they made an additional 10 dollars on the second transaction.

So combining both transactions, first one = profit of 10 dollars, second one = profit of 10 dollars, total = profit of 10 + 10 = 20 dollars.

Denton Young - 3 years, 7 months ago

In a strict accounting sense, the accrual basis of accounting, an inventory would not be considered as cost/expense for net income/profit calculation until sold. So when the item was bought back, we cannot consider the $110 dollar as a cost. So up to such point, they currently have a profit of $10 (100-90) and inventory cost at $110, and not a loss of $10 (110-100) and inventory cost of $90 (this would only be appropriate when it is sold and bought back on the same day).

M-Cee Malicsi - 3 years, 5 months ago

Ikhwan Norazam
Oct 24, 2017

We don't know the profit yet so we add $0 first.We know the bike store buy a bike for $90 and sell it for$100.

Now we use (profit-cost+selling prize=profit) So ($0-$90+$100=$10)

Now we know the profit of the bike shop is $10 but we also know the bike shop buy a bike for $110 and sell it for $120 a month later.

So now we have $10-$110+$120=$20

Know we now the answer

The bike sale(s)

The answer is 20.

2 solutions

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