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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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