Country Guides Inc. uses the gross margin method to estimate its ending inventory for each quarter. The following information for the second quarter was provided from the records: $\begin{array} { | l | l | }
\hline \text { Sales revenue } & \$ 200,000 \
\hline \text { Purchases } & 47,500 \
\hline \text { Freight-in } & 1,400 \
\hline \text { Beginning inventory } & 41,250 \
\hline \text { Purchase returns } & 900 \
\hline \text { Estimated gross margin rate } & 72 \text { percent } \
\hline
\end{array}$
The estimated ending inventory for the second quarter is:
A) $30,250
B) $32,250
C) $33,250
D) $35,050

Question

Country Guides Inc. uses the gross margin method to estimate its ending inventory for each quarter. The following information for the second quarter was provided from the records: $\begin{array} { | l | l | } 
\hline \text { Sales revenue } & \$ 200,000 \
\hline \text { Purchases } & 47,500 \
\hline \text { Freight-in } & 1,400 \
\hline \text { Beginning inventory } & 41,250 \
\hline \text { Purchase returns } & 900 \
\hline \text { Estimated gross margin rate } & 72 \text { percent } \
\hline
\end{array}$
 The estimated ending inventory for the second quarter is:
A) $30,250
B) $32,250
C) $33,250
D) $35,050

Quizplus · Accepted Answer

The estimated ending inventory is calculated as follows:Estimated ending inventory = Beginning inventory + Purchases + Freight-in - Purchase returns - Cost of goods soldCost of goods sold = Sales revenue * (1 - Gross margin rate)Cost of goods sold = $200,000 * (1 - 0.72) = $56,000Estimated ending inventory = $41,250 + $47,500 + $1,400 - $900 - $56,000 = $33,250

Country Guides Inc The Estimated Ending Inventory for the Second Quarter Is: A)

Country Guides Inc The Estimated Ending Inventory for the Second Quarter Is:
A)