Owens Janitor Supply has the following account balances at the end of the current accounting period. $\begin{array}{|l|c|}
\hline \text { Beginning inventory } & \$ 50,000 \
\hline \text { Net purchases } & 400,000 \
\hline \text { Net sales revenue } & 500,000\\hline
\end{array}$ A normal gross profit percent is 40%.What is the Estimated ending inventory as determined by the gross profit method?

Question

Owens Janitor Supply has the following account balances at the end of the current accounting period. $\begin{array}{|l|c|}
\hline \text { Beginning inventory } & \$ 50,000 \
\hline \text { Net purchases } & 400,000 \
\hline \text { Net sales revenue } & 500,000\\hline 
\end{array}$ A normal gross profit percent is 40%.What is the Estimated ending inventory as determined by the gross profit method?

Quizplus · Accepted Answer

The estimated ending inventory can be calculated using the gross profit method as follows: 1. Calculate the cost of goods sold (COGS):    - Gross profit = Net sales revenue * Gross profit percent = $500,000 * 40% = $200,000   - COGS = Net sales revenue - Gross profit = $500,000 - $200,000 = $300,0002. Estimate the ending inventory:    - Beginning inventory + Net purchases - COGS = Ending inventory   - $50,000 + $400,000 - $300,000 = $150,000

Owens Janitor Supply Has the Following Account Balances at the End