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    softtuch1's Avatar
    softtuch1 Posts: 1, Reputation: 1
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    #1

    Jul 31, 2011, 12:36 PM
    How to find ending inventory by the gross profit method
    How do you estimate ending inventory by the gross profit method
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    Jul 31, 2011, 01:24 PM

    First you have to calculate the gross profit percentage by dividing your gross profit by your sales:

    For example your gross profit is $126,000 divided by sales of $210,000 equals 60%

    Next you have to know your beiginning inventory plus your purchases, which equals your inventory available for sale.

    Now you can calculate your ending inventory.

    For example: your inventory available for sale is $100,000

    Your Sales of $210,000 times the gross profit percentage of 60% equals incentory sold of $84,000.

    Your inventory available for sale of $100,000 minus inventory sold of $84,000 equals ending inventory of $16,000
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