Landis Company is preparing its financial statements. Gross margin is normally 40% of sales. Information taken from the company's records revealed sales of $75,000; beginning inventory of $7,500 and purchases of $52,500. What is the estimated amount of ending inventory at the end of the period?

Question

Quizplus · Accepted Answer

To find the ending inventory, first calculate the cost of goods sold (COGS) using the gross margin. Gross margin is 40% of sales, so COGS is 60% of sales. COGS = 0.60 * $75,000 = $45,000. Then, use the formula: Beginning Inventory + Purchases - COGS = Ending Inventory. $7,500 + $52,500 - $45,000 = $15,000.

Landis Company Is Preparing Its Financial Statements