Question

Swifty Corporation’s April 30 inventory was destroyed by fire. January 1 inventory was $159,400, and purchases for January through April totaled $504,000. Sales revenue for the same period was $671,100. Swifty’s normal gross profit percentage is 35% on sales.
Using the gross profit method, estimate Swifty’s April 30 inventory that was destroyed by fire.

Answer 1

Answer:

$226,000

Explanation:

Ending Inventory As of April 30, is the ending inventory from January to April.

Opening inventory = $159,409

Purchases = $504,000

gross profit =35% of  $671,100

=0.35 x 671,000

=234,000

cost of goods sold = revenue - gross profit

=$671,100 - $234,000

=$437, 000

cost of goods sold = opening inventory + purchases- ending inventory

=$437, 000=  $159,409 +  $504,000- ending inventory

=$437,000= $663,409- ending inventory.

Ending inventory =  $663,409 - $437,000

=$226,000