Question

For 2014, cost of goods available for sale for Tate Corporation was $2,700,000. The gross profit rate on sales was 20%. Sales for the year were $2,400,000. What was the amount of the ending inventory?

Answer 1

$780

Step-by-step explanation:

Gross profit is 20% of sales.

Therefore, gross profit = 20% of $2,400,000

=20/100 x $2,400,000

=0.2 x $2,400,000

=$480,000

Typically, sales - cost of goods sold = gross profit

$2,400,000 - COGS = $480,000

COGS =$,2,400,000 - $480,000

COGS = $1,920,000

In calculating COGS,

COGS = beginning inventory + Purchases - ending inventory

( beginning inventory + Purchases)= Cost of goods available for sale

$1920,000 = 2,700,000 - ending inventory

Ending inventory= $2,700,000 - $1,920,000

Ending inventory =$780,000