Question

Based on the following data, estimate the cost of the ending inventory: Line item description amount Sales $9,250,000 Estimated gross profit rate 36% Beginning inventory $180,000 Purchases (net) $5,945,000 Merchandise available for sale $6,125,000

A) $1,945,000
B) $2,655,000
C) $3,145,000
D) $3,880,000

Answer 1

To estimate the ending inventory cost, the Cost of Goods Sold is computed from sales and gross profit, then subtracted from the merchandise available for sale. The calculation results in an estimated ending inventory value of $205,000. None of the options is correct.

Step-by-step explanation:

The student is asking how to estimate the cost of ending inventory using provided financial data.

To find the cost of the ending inventory, we need to calculate the cost of goods sold (COGS) and then subtract it from the merchandise available for sale.

The formula to calculate COGS is Sales minus Gross Profit.

First, we calculate the gross profit using the sales and the estimated gross profit rate: $9,250,000 sales × 36% gross profit rate = $3,330,000 gross profit.

Next, we find COGS: $9,250,000 sales - $3,330,000 gross profit = $5,920,000 COGS.

Finally, we estimate the cost of the ending inventory: $6,125,000 merchandise available for sale - $5,920,000 COGS = $205,000 estimated ending inventory value.

None of the options is correct.