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Comprehensive in class Problems Inventory special valuation Oct 26th Hector company’s records indicate the gross profit...

Comprehensive in class Problems Inventory special valuation Oct 26th

  1. Hector company’s records indicate the gross profit on sales at 40% and the following information:

December 31st ending inventory $23,000

Purchases Jan 1 – June 30th $482,000

Freight cost on purchases   $25,000

Sales Jan 1 – June 30th $860,000

Calculate cost of ending inventory using the gross profit method.

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Answer #1
Gorss profit = $860000*40%
=$344000
Cost of goods sold = $860000-344000
=$516000
Net purchases = purchases + freight
=$482000+25000
=$507000
Ending inventory = beginning inventory + purchases - cost of goods sold
=$23000+507000 -516000
=$14000
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