At the beginning of the year,Saratoga Dress Co.had an inventory of $300,000.During the year,the company purchased merchandise costing $850,000.Net sales for the year totaled $1,200,000,and the gross profit rate was 45%.The cost of goods sold and the ending inventory,respectively,were:

Question

Quizplus · Accepted Answer

The calculation of cost of goods sold is as follows:

COGS = Beginning Inventory + Purchases - Ending Inventory

COGS = $300,000 + $850,000 - Ending Inventory

We know that the gross profit rate is 45%, so the cost of goods sold must be 55%:

COGS = 55% x $1,200,000
COGS = $660,000

Now we can solve for the ending inventory:

COGS = Beginning Inventory + Purchases - Ending Inventory

$660,000 = $300,000 + $850,000 - Ending Inventory

Ending Inventory = $490,000

Therefore, the answer is C) $660,000 and $490,000.

At the Beginning of the Year,Saratoga Dress Co