Lorna Company has the following data available: $$\begin{array} { | l | r | }
\hline \text { Beginning inventory } & \$ 170,000 \
\hline \text { Net purchases } & \$ 500,000 \
\hline \text { Net sales } & \$ 900,000 \
\hline \text { Gross profit percentage } & 60 \% \
\hline
\end{array}$$
The estimated cost of the ending inventory using the gross profit method is ________.
A) $310,000
B) $540,000
C) $360,000
D) $670,000

Question

Lorna Company has the following data available: $$\begin{array} { | l | r | } 
\hline \text { Beginning inventory } & \$ 170,000 \
\hline \text { Net purchases } & \$ 500,000 \
\hline \text { Net sales } & \$ 900,000 \
\hline \text { Gross profit percentage } & 60 \% \
\hline
\end{array}$$ 
The estimated cost of the ending inventory using the gross profit method is ________.
A) $310,000
B) $540,000
C) $360,000
D) $670,000

Quizplus · Accepted Answer

The cost of goods sold (COGS) is 40% of net sales (100% - 60% gross profit). COGS = $900,000 * 40% = $360,000. The cost of goods available for sale is $170,000 (beginning inventory) + $500,000 (net purchases) = $670,000. Estimated ending inventory = $670,000 - $360,000 = $310,000.

Lorna Company Has the Following Data Available The Estimated Cost of the Ending Inventory Using the Gross