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Could you explain how to solve this problem? 1) A firm’s inventory is destroyed by fire...

Could you explain how to solve this problem? 1) A firm’s inventory is destroyed by fire on April 4. Beginning inventory is $20,000, net purchases through April 4 are $250,000, and sales through April 4 amount to $320,000. what is the ending inventory at April 4? Also assume a gross margin percentage of 40%

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Answer #1

Sales = $320,000

Gross profit margin = 40%

Hence, Gross profit = Sales x 40%

= 320,000 x 40%

= $128,000

Cost of goods sold = Sales - Gross profit

= 320,000 - 128,000

= $192,000

Cost of goods sold = Beginning inventory + Purchases - Ending inventory

192,000 = 20,000 + 250,000 - Ending inventory

Ending inventory = $78,000

Hence, ending inventory at April 4 = $78,000

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