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% The value of ending inventory is $

Answer 1

To estimate the value of ending inventory using the gross profit method, we can use the formula: Ending Inventory = Beginning Inventory + Purchases - Cost of Goods Sold. By calculating the cost of goods sold using the given information and subtracting it from the sum of the beginning inventory and purchases, we can find that the value of the ending inventory is $200.

Step-by-step explanation:

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

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

First, let's calculate the Cost of Goods Sold (COGS). COGS is calculated by multiplying the Sales by the Gross Profit Percentage:

COGS = Sales x (1 - Gross Profit Percentage)

Using the given information, we can calculate COGS as follows:

COGS = $100 x (1 - 0.50) = $50

Now, let's calculate the Ending Inventory:

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

Therefore, the value of the ending inventory is $200.