Question

On January 1, 2017, the merchandise inventory of Glaus, Inc. was $1,600,000. During 2017 Glaus purchased $3,200,000 of merchandise and recorded sales of $4,000,000. The gross profit rate on these sales was 25%. What is the merchandise inventory of Glaus at December 31, 2017?
a. $800,000.

b. $1,000,000.

c. $1,800,000.

d. $3,000,000.

Answer 1

Answer: $1,800,000

Explanation:

The merchandise inventory of Glaus at December 31, 2017 will be:

Begining Inventory = $1,600,000

Add: Purchases = $3,200,000

Less: Cost of goods sold = $4,000,000

Add: Gross profit = 25% × $4,000,000 = $1,000,000

Ending Inventory = $1,800,000

The answer is $1,800,000.