On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements. The following information is available: Beginning inventory, January 1: $4,000 Net sales: $80,000
Net purchases: $78,000
The company's gross margin ratio is 25%.
-Using the gross profit method, the cost of goods sold would be:
A) $19,500.
B) $63,000.
C) $60,000.
D) $58,500.
E) $20,000.

Question

On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements. The following information is available: Beginning inventory, January 1: $4,000 Net sales: $80,000
Net purchases: $78,000
The company's gross margin ratio is 25%. 
-Using the gross profit method, the cost of goods sold would be:
A) $19,500.
B) $63,000.
C) $60,000.
D) $58,500.
E) $20,000.

Quizplus · Accepted Answer

The cost of goods sold (COGS) is calculated by subtracting the gross margin from net sales. With a gross margin ratio of 25%, the gross margin is $80,000 * 25% = $20,000. Therefore, COGS is $80,000 - $20,000 = $60,000.

On March 31 a Company Needed to Estimate Its Ending