Ernst Equipment Co. wants to prepare interim financial statements for the first quarter. The company wishes to avoid making a physical count of inventory. Ernst’s gross profit rate averages 30%. The following information for the first quarter is available from its records:

January 1 Beginning inventory ……….. $ 752,880
Cost of goods purchased ……………… 2,159,630
Sales …………………………………... 3,710,250
Sales returns …………………………... 74,200

Required

Use the gross profit method to estimate the company’s first quarter ending inventory.

Current Margin: 30%
Sales $3,710,250
Less: Cost of Goods Sold
Beginning inventory $752,880
Purchases $2,159,630
COG Available $2,912,510
COGS $2,597,175
Gross Profit $1,113,075

Less: Ending Inventory $389,535
COGA - COGS + Returns = $2,912,510 - $2,597,175 + $74,200 = $389535

Please pardon the appearance of this as it's hard to format.