Question

hp Help Save & Saved work Che On January 1, JKR Shop had $480,000 of inventory at cost. In the first quarter of the year, it purchased 51,620,000 of merchandise returned $23,400, and paid freight charges of $37.900 on purchased merchandise, terms FOB shipping point. The company's gross profit averages 25%, and the store had $2,030,000 of net sales (at retail) in the first quarter of the year. Use the gross profit method to estimate its cost of inventory at the end of the first quarter $ 480.000 Beginning inventory Net cost of goods purchased Estimated March 31 Inventory < Prev 3 of 3 Nove 11 e here to search

Answer 1

1. Estimated Cost of Ending Inventory = $592,000

Explanation

Beginning Inventory	$480,000
*Net Cost of Goods Purchased	$1,634,500
Goods Available for Sale	$2,114,500
**Cost of Goods Sold	$1,522,500
Ending Inventory	$592,000

*Net Cost of Goods Purchase = $1,620,000-$23,400+$37,900 =$1,634,500

**   

Sales	$2,030,000	100%
Cost of Goods Sold	$1,522,500	75%
Gross Profit	$507,500	25%

2.

Particulars	At Cost	Cost to Retail Ratio	At Retail
Beginning Inventory	$32,900		$65,200
Cost of Goods Purchased	$74,090		$99,400
Cost of Goods Available for Sale	$106,990	65%	$164,600
Net Sales at Retail			$140,000
Ending Inventory	$15,990	65%	$24,600

Calculation;

	At Cost	At Retail
Goods Available for Sale
Beginning Inventory	$32,900	$65,200
Cost of Goods Purchased	$74,090	$99,400
Goods Available for Sale	$106,990	$164,600
Deduct Net Sales at Retail		$140,000
Ending Inventory at Retail		$24,600
Cost Ratio ($106,990/$164,600)=.65	$15,990