For the period from 2016 through 2016, the Charlie Company had net sales of $500,000 and a gross profit of $200,000. During the first quarter of 2018, the company made purchases of $19,500 and recorded sales of $47,500. The inventory value at the beginning of the year was 15,500. What is the estimated cost of Charlie's inventory on March 31, 2018, using the gross profit method?

Question

Quizplus · Accepted Answer

The gross profit percentage is 40% ($200,000 gross profit / $500,000 sales). For 2018 Q1, sales were $47,500, so the estimated cost of goods sold is $28,500 (60% of $47,500). Beginning inventory was $15,500, plus purchases of $19,500, minus cost of goods sold $28,500, equals an estimated ending inventory of $6,500.

For the Period from 2016 Through 2016, the Charlie Company