Question

On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale Corporation. The following information is available: Sales, January 1 through July 8 $691,000 Inventory, January 1 140,000 Purchases, January 1 through July 8 658,000 Gross profit ratio 29% What is the estimated inventory on July 8 immediately prior to the fire? Multiple Choice $190,820. $307,390. $307,790. $490,610.

Answer 1

Answer:

$307,390

Explanation:

Given that,

Cost of Goods Available:

= Beginning Inventory + Net Purchases

= $140,000 + $658,000

= $798,000

Cost of goods Sold:

= [(100 - Gross profit ratio) ÷ 100] × Sales

= [(100 - 29) ÷ 100] × $691,000

= $490,610

Ending Inventory:

= Cost of goods available - cost of good sold

= $798,000 - $490,610

= $307,390