Question

The following information was taken from the 2011 income statement of Ultimate Sales: Pretax income, $12,000; Total operating expenses (not including income taxes), $21,000; Sales revenue, $120,000; Beginning inventory, $11,000; and Purchases, $90,000. Compute the amount of the ending inventory for the company:

Answer 1

Answer:

Ending inventory = 14,000

Explanation:

First, we must clear the COSG from the Pretax Income calculation:

Pretax income = Sales revenue - COSG - Total operating expenses

COSG = Sales revenue - Total operating expenses - Pretax income

COSG = 120,000 - 21,000 - 12000

COSG = 87,000

With this data we can clear the ending inventory of the COSG formula:

COSG = Beginning inventory + Purchases - Ending inventory

Ending inventory = Beginning inventory + Purchases - COSG

Ending inventory = 11,000 + 90,000 - 87,000

Ending inventory = 14,000