Question

2a. Estimate the cost of the inventory of Ranchworks Co. on November 30 by the gross profit method, presenting details of the computations. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Ranchworks Co. Estimated Cost of Inventory November 30 Cost Inventory, March 1 880,000 Net purchases 9,500,000 Merchandise available for sale 10,380,000 Sales 15,800,000 Estimated gross profit 6,004,000 Estimated cost of goods sold 9,796,000 x Estimated inventory, November 30 584,000

Answer 1

2 a) Calculation of Estimated Cost of Inventory on Nov 30 (Amounts in $)

Ranchworks Co.
Estimated Cost of Inventory
November 30
		Cost
Inventory, March 1		880,000
Net Purchases		9,500,000
Merchandise available for sale		10,380,000
Sales	15,800,000
Estimated Gross Profit (15,800,000*38%)	-6,004,000
Estimated Cost of Goods Sold (15,800,000-6,004,000)		-9,796,000
Estimated Inventory, Nov 30 (10,380,000-9,796,000)		584,000

Therefore estimated inventory on November 30 is $584,000.

Working Notes:-

1) It is mentioned in the requirement of the question that amount to be deducted should be shown with a minus sign.