Landis Company is preparing its financial statements.Gross margin is normally 40% of sales.Information taken from the company's records revealed sales of $25,000;beginning inventory of $2,500 and purchases of $17,500.The estimated amount of ending inventory would be:

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. Sales are $25,000, so COGS is $25,000 * 60% = $15,000. Then, use the formula: Beginning Inventory + Purchases - COGS = Ending Inventory. So, $2,500 + $17,500 - $15,000 = $5,000.

Landis Company Is Preparing Its Financial Statements