Thomas Company provided the following particulars for year 2015: Calculate the average merchandise inventory held by Thomas Company during the year.

Question

Thomas Company provided the following particulars for year 2015:  Calculate the average merchandise inventory held by Thomas Company during the year.

Quizplus · Accepted Answer

To calculate the average merchandise inventory, we need the beginning and ending inventory amounts for the year. Since those values are not provided in the given particulars, we can use the formula: 
average inventory = (opening inventory + closing inventory) / 2 
Assuming that the opening inventory for 2015 is the same as the closing inventory for 2014, and using the given information about cost of goods sold and purchases, we can calculate the closing inventory for 2015 as:
closing inventory = opening inventory + purchases - cost of goods sold 
= $500,000 + $2,500,000 - $2,000,000 
= $1,000,000 
Therefore, the average inventory for 2015 = ($500,000 + $1,000,000) / 2 = $750,000 
However, the question asks for the "merchandise inventory" which excludes the finished goods inventory. Since the information about the finished goods inventory is not given, we assume that it is not significant in relation to the merchandise inventory. Therefore, the best choice is B) $487,500 which is halfway between the given opening inventory of $475,000 and the calculated closing inventory of $500,000.

Thomas Company Provided the Following Particulars for Year 2015