Question

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

Answer 1

$205,000

Explanation:

The computation of the cost of the ending merchandise inventory is shown below:-

Cost of the ending merchandise inventory = Merchandise available for sale - (Net Sales - Gross profit)

= $6,125,000 - ($9,250,000 - $9,250,000 × 36%)

= $6,125,000 - ($9,250,000 - $3,330,000)

= $205,000

Therefore we applied the above formula so that the cost of ending merchandise inventory could come