Question

1. Company III has provided the following operating information: sales $70,000, purchased inventory $68,000, net income $10,000, beginning inventory $25,000, and gross profit $20,000. How much was Company III 's ending inventory?

   	a.	$33,000
   	b.	$12,000
   	c.	$43,000
   	d.	$113,000

Answer 1

Solution :

The Answer is (c) $ 43,000.

Working :

Step 1 :

Gross Profit = Sales - Cost of Goods Sold

$ 20,000 = $ 70,000 - Cost of Goods Sold

Cost of Goods Sold = $ 70,000 - $ 20,000 = $ 50,000

Step 2 :

Cost of Goods Sold = Opening Stock + Purchases - Closing Stock

$ 50,000 = $ 25,000 + $ 68,000 - Closing Stock

$ 50,000 = $ 93,000 - Closing Stock

Closing Stock = $ 93,000 - $ 50,000

Closing Stock = $ 43,000

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