Wildflower, Inc. provided the following for 2019: $$\begin{array} { | l | r | }
\hline \text { Cost of Goods Sold (Cost of sales) } & \$ 1,000,000 \
\hline \text { Beginning Merchandise Inventory } & 325,000 \
\hline \text { Ending Merchandise Inventory } & 630,000 \
\hline
\end{array}$$ Calculate the average merchandise inventory held by Wildflower, Inc. during the year.

Question

Wildflower, Inc. provided the following for 2019: $$\begin{array} { | l | r | } 
\hline \text { Cost of Goods Sold (Cost of sales) } & \$ 1,000,000 \
\hline \text { Beginning Merchandise Inventory } & 325,000 \
\hline \text { Ending Merchandise Inventory } & 630,000 \
\hline
\end{array}$$ Calculate the average merchandise inventory held by Wildflower, Inc. during the year.

Quizplus · Accepted Answer

The average merchandise inventory can be calculated using the following formula:
Average merchandise inventory = (Beginning inventory + Ending inventory) / 2

However, the given information only provides the total cost of goods available for sale during the year, which includes both the beginning and ending inventories. Therefore, we need to divide this total by 2 to get the average inventory.

Total cost of goods available for sale = Beginning inventory + Purchases - Cost of goods sold + Ending inventory
Total cost of goods available for sale = $1,910,000

Average merchandise inventory = Total cost of goods available for sale / 2
Average merchandise inventory = $1,910,000 / 2
Average merchandise inventory = $955,000

Therefore, the correct answer is B, as it is the closest to the calculated average inventory value of $955,000.

Wildflower, Inc Calculate the Average Merchandise Inventory Held by Wildflower, Inc