Won Inc has an historical gross profit percentage of 35%. Net purchases for six months were $1400 and sales were $2000. Inventory at the end of the previous period was $200. If Won Inc prepares an interim balance sheet the amount that can be estimated for closing inventory is:

Question

Quizplus · Accepted Answer

First, we need to calculate the cost of goods sold (COGS) for the six-month period.

COGS = Net purchases + Beginning inventory - Ending inventory 
COGS = $1400 + $200 - Ending inventory

We know that the gross profit percentage is 35%, which means that COGS is 65% of sales.

COGS = 0.65 x Sales 
$1400 + $200 - Ending inventory = 0.65 x $2000 
$1600 - Ending inventory = $1300 
Ending inventory = $300

Therefore, the estimated closing inventory is $300.

Won Inc Has an Historical Gross Profit Percentage of 35