On January 1, 2014, the merchandise inventory of Glaus, Inc. was $1,200,000. During 2014 Glaus purchased $2,400,000 of merchandise and recorded sales of $3,000,000. The gross profit rate on these sales was 25%. What is the merchandise inventory of Glaus at December 31, 2014?
A) $600,000.
B) $750,000.
C) $1,350,000.
D) $2,250,000.

Question

Quizplus · Accepted Answer

The cost of goods sold can be calculated as follows: 
Cost of goods sold = Sales - Gross profit = $3,000,000 - ($3,000,000 x 25%) = $2,250,000

Using the formula for calculating ending inventory: 
Ending inventory = Beginning inventory + Purchases - Cost of goods sold 
Ending inventory = $1,200,000 + $2,400,000 - $2,250,000 = $1,350,000

Therefore, the merchandise inventory of Glaus at December 31, 2014 is $1,350,000.

On January 1, 2014, the Merchandise Inventory of Glaus, Inc