Question

Wayward Company wants to prepare interim financial statements for the first quarter. The company wishes to avoid making a physical count of inventory. Wayward's gross profit rate averages 30%. The following information for the first quarter is available from its records. January 1 beginning inventory $ 450,260 Cost of goods purchased 1,089,050 Sales 1,341,150 Sales returns 10,950 Required: Use the gross profit method to estimate the company's first quarter ending inventory.

Answer 1

first let us know net sales:

sales -sales returns

=>1,341,150 - 10,950

=>1,330,200.

sales net off gross profit

=>1,330,200*(1-0.30 gross profit)

cost of goods sold=>$931,140.

now first quarter ending inventory:

beginning inventory	450,260
add: cost of goods purchased	1,089,050
less:cost of goods sold	(931,140)
ending inventory	608,170