Question

# Exercise 2 (Darnell): Darnell Company uses the gross profit method to estimate ending inventory and cost...

Exercise 2 (Darnell): Darnell Company uses the gross profit method to estimate ending inventory and cost of goods sold when preparing monthly financial statements required by its bank. Inventory on hand at the end of July was \$127,000. They estimate a gross profit percentage of 30%. The following information for the month of August was available from company records: Purchases \$228,000 Freight-in 6,100 Sales 359,000 Sales returns 9,900 Purchases returns 5,200 In addition, the controller is aware of \$10,000 of inventory that was stolen during August from one of the company’s warehouses. What is the estimated inventory at the end of August?

Calculate estimated inventory

 Beginning inventory 127000 Cost of goods purchased Purchases 228000 Less: Purchase return -5200 Add: Freight in 6100 Cost of goods purchased 228900 Cost of goods available for sale 355900 Less: Cost of goods sold Net sales 349100 Less: Gross profit percentage -104730 Estimated cost of goods sold -244370 Estimated inventory 111530 Stolen -10000 Estimated inventory at the end of august 101530

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