The beginning inventory of Soft Toys Company was $42,000.The purchases (excluding returns)and sales revenue for the year were $250,000 and $320,000,respectively.The purchase returns amounted to $31,000.The company's normal gross profit percentage is 80%.What is the amount of estimated ending inventory?

Question

Quizplus · Accepted Answer

The cost of goods sold (COGS) is calculated as sales revenue divided by (1 + gross profit percentage). COGS = $320,000 / 1.8 = $177,777.78. The net purchases are $250,000 - $31,000 = $219,000. The cost of goods available for sale is $42,000 + $219,000 = $261,000. The estimated ending inventory is $261,000 - $177,777.78 = $83,222.22. However, this does not match any of the options, indicating a potential error in the problem setup or options.

The Beginning Inventory of Soft Toys Company Was $42,000