The following data is available: $$\begin{array} { | r | r | }
\hline \text { Net sales, first month } & \$ 13,000 \
\hline \text { Normal gross profit } & 45 \% \
\hline \text { Beginning inventory } & 8,000 \
\hline \text { Net purchases } & 7,000 \
\hline
\end{array}$$
-Using the gross profit method,the Estimated ending inventory balance would be:

Question

The following data is available: $$\begin{array} { | r | r | } 
\hline \text { Net sales, first month } & \$ 13,000 \
\hline \text { Normal gross profit } & 45 \% \
\hline \text { Beginning inventory } & 8,000 \
\hline \text { Net purchases } & 7,000 \
\hline
\end{array}$$
-Using the gross profit method,the Estimated ending inventory balance would be:

Quizplus · Accepted Answer

The gross profit method estimates the ending inventory balance as follows:1. Calculate the cost of goods available for sale:   Beginning inventory + Net purchases = $8,000 + $7,000 = $15,0002. Calculate the cost of goods sold (COGS):   Net sales * (1 - Normal gross profit) = $13,000 * (1 - 0.45) = $13,000 * 0.55 = $7,1503. Estimate the ending inventory balance:   Cost of goods available for sale - COGS = $15,000 - $7,150 = $7,850

The Following Data Is Available -Using the Gross Profit Method,the Estimated Ending Inventory Balance Would