Susan Florists had 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 per the gross profit method?

Question

Susan Florists had 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 per the gross profit method?

Quizplus · Accepted Answer

Using the gross profit method, we can calculate the estimated ending inventory by subtracting the estimated gross profit from the cost of goods sold. First, we need to calculate the estimated gross profit:
Sales = $224,300
Cost of Goods Sold = $156,460
Gross Profit = Sales - Cost of Goods Sold = $67,840
Gross Profit Percent = Gross Profit / Sales = $67,840 / $224,300 = 0.302 (30.2%)

Next, we can use the gross profit percent to estimate the cost of goods sold:
Estimated Cost of Goods Sold = Sales x (1 - Gross Profit Percent) = $224,300 x (1 - 0.302) = $156,370

Finally, we can calculate the estimated ending inventory:
Estimated Ending Inventory = Cost of Goods Sold - Estimated Gross Profit = $156,370 - $63,410 = $92,960

Therefore, the best choice is C, $63,410.

Susan Florists Had the Following Account Balances at the End