Question

On January 1, 2020, the merchandise inventory of Wildhorse, Inc. was $2050000. During 2020 Wildhorse purchased $4091000 of merchandise and recorded sales of $4900000. The gross profit rate on these sales was 25%. What is the merchandise inventory of Wildhorse at December 31, 2020

Answer 1

$2,466,000

Step-by-step explanation:

Use the missing figure approach or gross profit method as below :

Trading Account

Sales $4900000

Less Cost of Sales :

Opening Inventory $2050000

Add Purchases $4091000

Total $6,141,000

Less Closing Inventory ($2,466,000) ($3,675,000)

Gross Profit ($4900000 x 25%) $1,225,000

thus,

The merchandise inventory of Wildhorse at December 31, 2020 is $2,466,000