Question

At the beginning of the year, Saratoga Dress Co. had an inventory of $300,000. During the year, the company purchased merchandise costing $850,000. Net sales for the year totaled $1,200,000, and the gross profit rate was 45%. The cost of goods sold and the ending inventory, respectively, were:

Answer 1

Answer:

The cost of goods sold and the ending inventory, respectively, were: $660,000 and $490,000

Explanation:

Saratoga Dress Co. had gross profit rate of 45%

Gross profit rate = (Gross Profit/ Sales)x 100%

Gross Profit = (Gross profit rate x Sales)/100% = (45% x $1,200,000)/100% = $540,000

Cost of Goods Sold = Sales - Gross Profit = $1,200,000 - $540,000 = $660,000

The ending inventory = the beginning inventory + purchasing merchandise - Cost of Goods Sold = $300,000 + $850,000 - $660,000 = $490,000