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    myhomeworkbiz's Avatar
    myhomeworkbiz Posts: 2, Reputation: 1
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    #1

    Jul 17, 2008, 12:33 PM
    Gross Profit Method
    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.
    jakester's Avatar
    jakester Posts: 582, Reputation: 165
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    #2

    Jul 17, 2008, 01:04 PM
    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.
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