Question

4) The Mark Company uses the gross profit method. Inventory May 1 Purchases (gross) Freight-in $2,000,000 140,000 24,000 $ 320,000 1,280,000 60,000 Sales Sales returns Purchase discounts Compute the estimated ending inventory assuming that the gross profit is 30% of sales. (5 points) aining to their netty

Answer 1

Step-1:Calculation of gross profit
Sales		a		$       20,00,000
Sales return		b		$          1,40,000
Net Sales		c=a-b		$       18,60,000
Gross Profit		d=c*30%		$          5,58,000
Step-2:Calculation of cost of goods sold
Sales		a		$       18,60,000
Gross Profit		b		$          5,58,000
Cost of goods sold		c=a-b		$       13,02,000
Step-3:Calculation of cost of goods available for sale
Inventory May 1				$          3,20,000
Purchase (Gross)			$ 12,80,000
Purchase discount			$     -24,000
Net Purchase				$       12,56,000
Freight-in				$             60,000
Cost of goods available for sale				$       16,36,000
Step-4:Calculation of estimated ending inventory
Cost of goods available for sale			a	$       16,36,000
Cost of goods sold			b	$       13,02,000
Cost of ending inventory			c=a-b	$          3,34,000