A company that has operated with a 30% average gross profit ratio for a number of years had $110,000 in net sales during the first quarter of this year. If it began the quarter with $28,000 in inventory at cost and purchased $75,000 of merchandise during the quarter, its estimated ending inventory by the gross profit method is

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Quizplus · Accepted Answer

To estimate the ending inventory using the gross profit method, follow these steps:1. Calculate the cost of goods sold (COGS):   - Gross profit ratio = 30%, so the cost ratio = 100% - 30% = 70%.   - COGS = Net sales * Cost ratio = $110,000 * 70% = $77,000.2. Estimate the ending inventory:   - Beginning inventory + Purchases - COGS = Ending inventory.   - $28,000 + $75,000 - $77,000 = $26,000.Therefore, the estimated ending inventory is $26,000.

A Company That Has Operated with a 30% Average Gross