Blue Company on January 1, had inventory costing $65,000; during January net purchases were $119,000. Over recent years, Blue's gross profit has averaged 40% on sales. Assuming that the company has net sales of $190,000, calculate the estimated cost of ending inventory by using the gross profit method.

Question

Quizplus · Accepted Answer

Cost of good avail for sale = ($65,000 + $119,000)= $184,000; Est cost of goods sold = $190,000 × (1 - .4)= $190,000 × .6 = $114,000; $184,000 - $114,000 = $70,000.

Blue Company on January 1, Had Inventory Costing $65,000; During