During the month of January,Sundown Corporation had sales of $300,000 and a cost of goods available for sale of $600,000.The company consistently earns a gross profit rate of 45%.Using the gross profit method,the estimated inventory at January 31 amounts to:
A)$135,000.
B)$435,000.
C)$165,000.
D)$465,000.

Question

Quizplus · Accepted Answer

To estimate the inventory at January 31 using the gross profit method, first calculate the gross profit: $300,000 sales * 45% = $135,000. Then, subtract the gross profit from sales to find the cost of goods sold (COGS): $300,000 - $135,000 = $165,000. Finally, subtract COGS from the cost of goods available for sale to estimate the ending inventory: $600,000 - $165,000 = $435,000.

During the Month of January,Sundown Corporation Had Sales of $300,000