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BB Inventory $275,000; Net Sales $960,000; Purchases $465,000; Gross Profit percentage 44%. What is the estimated...

BB Inventory $275,000; Net Sales $960,000; Purchases $465,000; Gross Profit percentage 44%. What is the estimated EB Inventory using the Gross Profit Method? Optional Answers: 1. $202,400 2. $325,600 3. $422,400 4. $740,000

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Answer #1

BB Inventory = $275,000

Net Sales = $960,000

Purchases = $465,000

Gross Profit percentage = 44%

Gross Profit = Net Sales x Gross Profit percentage

= 960,000 x 44%

= $422,400

Cost of goods sold = Net sales - Gross profit

= 960,000 - 422,400

= $537,600

Cost of goods sold = BB Inventory +  Purchases - EB Inventory

537,600 = 275,000 + 465,000 - EB Inventory

EB Inventory = $202,400

Estimated EB Inventory using the Gross Profit Method = $202,400

First option is correct

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