For the year ended December 31, 2019, Complex Company reported gross margin of $29,700, which was 30% of the sales for the period. The cost of goods available for sale was 120% of the cost of goods sold. The beginning inventory was twice as much as the ending inventory. What was the amount of purchases for 2019?
A)$13,860
B)$29,700
C)$41,580
D)$55,440

Question

Quizplus · Accepted Answer

Step 1: Calculate the sales for the period.
Gross Margin = 30% of Sales
$29,700 = 0.3 x Sales
Sales = $99,000

Step 2: Calculate the cost of goods sold.
Cost of Goods Sold + Gross Margin = Sales
Cost of Goods Sold + $29,700 = $99,000
Cost of Goods Sold = $69,300

Step 3: Calculate the cost of goods available for sale.
Cost of Goods Available for Sale = 120% of Cost of Goods Sold
Cost of Goods Available for Sale = 1.2 x $69,300
Cost of Goods Available for Sale = $83,160

Step 4: Calculate the ending inventory.
Beginning Inventory = 2 x Ending Inventory
Ending Inventory = $69,300 / 3 = $23,100

Step 5: Calculate the purchases for 2019.
Purchases = Cost of Goods Available for Sale – Ending Inventory
Purchases = $83,160 – $23,100
Purchases = $55,440

Therefore, the best choice is D) $55,440 because it is the correct calculation of the purchases for 2019.

For the Year Ended December 31, 2019, Complex Company Reported