At the beginning of 2018,Wilson Stores has an inventory of $300,000.Because sales growth was strong during 2018,the owner wants to increase inventory on hand to $450,000 at December 31,2018.If net sales for 2018 are expected to be $2,600,000,and the gross profit rate is expected to be 35%,compute the cost of the merchandise the owner should expect to purchase during 2018.
A)$750,000
B)$1,240,000
C)$1,690,000
D)$1,840,000

Question

Quizplus · Accepted Answer

Beginning inventory = $300,000
Desired ending inventory = $450,000
Cost of goods sold = Net sales x Gross profit rate
= $2,600,000 x 35% = $910,000
Cost of goods available for sale = Beginning inventory + Purchases
= $300,000 + Purchases
Purchases = Cost of goods available for sale - Beginning inventory
= $1,160,000 ($450,000 + $910,000) - $300,000 
= $860,000

Therefore, the owner should expect to purchase merchandise worth $860,000 in 2018.

At the Beginning of 2018,Wilson Stores Has an Inventory of $300,000.Because