Question

Given the following information, estimate the value of ending inventory using the gross profit method:

Beginning inventory $200
Purchases $50
Sales $100
Gross profit percentage 50%

Answer 1

To estimate the value of ending inventory using the gross profit method, you can use the formula: Ending Inventory = Beginning Inventory + Purchases - Cost of Goods Sold.

Step-by-step explanation:

To estimate the value of ending inventory using the gross profit method, you can use the formula:

Ending Inventory = Beginning Inventory + Purchases - Cost of Goods Sold

Given the information provided, the cost of goods sold can be calculated by multiplying the sales amount by the gross profit percentage:

Cost of Goods Sold = Sales * (1 - Gross Profit Percentage)

Substituting the values, we get:

Cost of Goods Sold = $100 * (1 - 0.50) = $50

Now, we can calculate the estimated value of the ending inventory:

Ending Inventory = $200 + $50 - $50 = $200