Question

At the beginning of 2018, Wilson Stores has an inventory of $300,000. Because sales growth was strong during 2018, the owner wants to increase inventory on hand to $450,000 at December 31, 2018. If net sales for 2018 are expected to be $2,600,000, and the gross profit rate is expected to be 35%, compute the cost of the merchandise the owner should expect to purchase during 2018.

Answer 1

1,840,000

Step-by-step explanation:

Answer 2

$1,840,000

Step-by-step explanation:

The computation of the cost of goods sold is shown below:

As we know that

Cost of goods sold = Opening inventory + Purchase - ending inventory

where,

Cost of goods sold = Sales revenue - sales revenue × gross profit ratio

= $2,600,000 - $2,600,000 × 0.35

= $2,600,000 - $910,000

= $1,690,000

Now the purchase amount is

$1,690,000 = $300,000 + purchase - $450,000

So, the purchase amounted to

= $1,840,000