On January 1, 2010, the merchandise inventory of Glaus, Inc.was $800,000.During 2010 Glaus purchased $1,600,000 of merchandise and recorded sales of $2,000,000.The gross profit rate on these sales was 25%.What is the merchandise inventory of Glaus at December 31, 2010?

Question

Quizplus · Accepted Answer

To find the ending inventory, first calculate the cost of goods sold (COGS) using the gross profit rate. Sales are $2,000,000 with a 25% gross profit, so COGS is 75% of sales, which is $1,500,000. Starting inventory ($800,000) plus purchases ($1,600,000) gives goods available for sale of $2,400,000. Subtract COGS ($1,500,000) from goods available for sale to get the ending inventory of $900,000.

On January 1, 2010, the Merchandise Inventory of Glaus, Inc