When preparing its quarterly financial statements,Pace Co.uses the gross margin method to estimate ending inventory.The following information is available for the quarter ending March 31,Year 2:

What is the estimated amount of inventory that is on hand on March 31,Year 2?

Question

When preparing its quarterly financial statements,Pace Co.uses the gross margin method to estimate ending inventory.The following information is available for the quarter ending March 31,Year 2:

What is the estimated amount of inventory that is on hand on March 31,Year 2?

Quizplus · Accepted Answer

Estimated gross margin = Sales × Estimated gross margin percentage
Estimated gross margin = $525,000 × 0.45 = $236,250
Estimated cost of goods sold = Sales ? Estimated gross margin
Estimated cost of goods sold = $525,000 ? $236,250 = $288,750
Cost of goods available for sale = Beginning inventory + Purchases
Cost of goods available for sale = $110,000 + $385,000 = $495,000
Ending inventory = Cost of goods available for sale ? Estimated cost of goods sold
Ending inventory = $495,000 ? $288,750 = $206,250

When Preparing Its Quarterly Financial Statements,Pace Co