Question

Given the following, calculate the estimated cost of ending inventory using the gross profit method: Gross...

Given the following, calculate the estimated cost of ending inventory using the gross profit method:

Gross profit on sales 30%

Beginning inventory, January 1, 2017

$30,000.00

Net purchases

$8,000.00

Net sales at retail for January

$16,000.00

Complete this partial comparative balance sheet by vertical analysis. Round percents to the nearest hundredth.

Column1 Column2 Column3 Column4 Column5
2016 2017

Assets

amount percent amount percent
Current assets:
a. Cash $38,000 $35,000
b. Accounts receivable $19,000 $18,000
c.merchandise inventory $16,000 $11,000
d. prepaid exoenses $20,000 $16,000
. . .
. . .
. . .
total current assets $180,000 $140,000

Homework Answers

Answer #1

1)

Step 1)

Gross Profit = sales* Gross profit %

             = 16000 * 30%

            = 4800

Step 2)

Gross Profit = Sales -Cost of goods sold

4800 = 16000- Cost of goods sold

Cost of goods sold = 16000-4800

           = 11200

Step 3 )

Cost of goods sold =Beginning invenory +Net purchase-ending inventory

11200= 30000 +8000-ending inventory

ending inventory = 30000+8000-11200

         = 26800

Estimated ending inventory = 26800

*For comparative analysis table missed the 2017 figures

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