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DIA [1.3K]
3 years ago
14

Big Box Store has operated with a 30% average gross profit ratio for a number of years. It had $100,000 in sales during the seco

nd quarter of this year. If it began the quarter with $18,000 of inventory at cost and purchased $72,000 of inventory during the quarter, its estimated ending inventory by the gross profit method is:__________
a) $30,000.
b) $21,000.
c) $20,000.
d) $18,000.
e) $27,000.
Business
1 answer:
nydimaria [60]3 years ago
5 0

Answer:

c) $20,000.

Explanation:

The computation of the estimated ending inventory is shown below:

We know that

Cost of goods sold = Beginning inventory + purchase made - ending inventory

And, the

Sales - gross profit = Cost of goods sold

$100,000 - $100,000 × 30% = Cost of goods sold

So, cost of goods sold would be

= $100,000 - $30,000

= $70,000

Now the ending inventory would be

$70,000 = $18,000 + $72,000 - ending inventory

$70,000 = $90,000  - ending inventory

So, the ending inventory would be

= $90,000 - $70,000

= $20,000

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Answer:

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Total Direct materials      $ 19,200     $ 14,400       $ 9,600       $ 43,200

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Actual overhead costs recorded during the first month of operations totaled $45,000.

<u>Journal Entries </u>

<u>Sr. No                    Particulars                 Debit                   Credit</u>

Job 102              Finished Goods           53,600

                           Work In Process                                     53,600

A journal entry showing the transfer of Job 102 into Finished Goods Inventory upon its completion.

Job 101                Sales                         60,000

                        Cost Of Goods Sold                              60,000

Journal entries to recognize the sales revenue and cost of goods sold for Job 101.

Job 101              Cost of Goods Sold        55,000

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<u>Over Applied Overhead      = $ 4000</u>

                                   

      Manufacturing Overhead  Accounts $ 4000  debit                  

              Cost of Goods Sold          $ 4000 Credit

Entry to transfer the balance of the Manufacturing Overhead account to Cost of Goods Sold.

(Entry to reduce the amount of Over applied Overhead)                                

                         

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