Haley's Florist Shop has the following account balances at the end of the current accounting period. A normal gross profit percent is 30%. What is the estimated ending inventory as determined by the gross profit method?

Question

Haley's Florist Shop has the following account balances at the end of the current accounting period.  A normal gross profit percent is 30%. What is the estimated ending inventory as determined by the gross profit method?

Quizplus · Accepted Answer

To find the estimated ending inventory using the gross profit method, we first need to calculate the cost of goods sold (COGS) using the gross profit percentage.

Beginning Inventory + Net Purchases = Cost of Goods Available for Sale 
$64,800 + $145,300 = $210,100

Cost of Goods Available for Sale - Gross Profit = Cost of Goods Sold 
$210,100 - 30%($210,100) = $147,070

Finally, we can use the COGS to find the estimated ending inventory:

Cost of Goods Available for Sale - COGS = Estimated Ending Inventory 
$210,100 - $147,070 = $63,410

Therefore, the best choice is C.

Haley's Florist Shop Has the Following Account Balances at the End