Question

On December 31, a company needed to estimate its ending inventory to prepare its annual financial...

On December 31, a company needed to estimate its ending inventory to prepare its annual financial statements. The following information is currently available:

Inventory as of January 1: $120,500
Net sales for the year: $400,000
Net purchases for the year: $270,500

This company typically achieves a gross profit ratio of 15%. What would be the value (balance) of ending Inventory under the gross profit method?

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Answer #1
Cost of Goods Sold ($ 4,00,000 * 85%)                                   A        3,40,000
Cost of Goods available for sale ($1,20,500 + $2,70,500)B        3,91,000
Ending Inventory                                                            (B-A)            51,000
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