Answer to Question #170583 in Accounting for eyoel

Question

assumethat wisdom company wishes to prepare an income statement for the month of january when its records show net sales br200,000 beginning inventory br40,000 and cost of goods purchased br120,000 in the preceding year the company realized 30% gross profit rate and it expects to earn the same rate this year. compute the+cost of ending inventory using gross profit method

Answer 1

Using gross profit method,

Cost of goods available for sale = Beginning inventory + cost of goods purchased

= br40,000+br120,000

= br160,000

Estimated cost of goods sold = Gross profit percentage *net sales

= 30%* br200,000

= br60,000

Cost of ending inventory = cost of goods available for sale - cost of goods sold

= br160,000-br60,000

= br100,000