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Chapter 9: 19E (page 480)

Presented below is information related to Aaron Rodgers Corporation for the current year. Beginning inventory \( 600,000 Purchases 1,500,000 Total goods available for sale \)2,100,000 Sales revenue 2,500,000 Instructions Compute the ending inventory, assuming that (a) gross profit is 45% of sales, (b) gross profit is 60% of cost, (c) gross profit is 35% of sales, and (d) gross profit is 25% of cost.

Short Answer

Expert verified

(a) Ending inventory is $725,000.

(b) Ending inventory is $537,500.

(c) Ending inventory is $475,000.

(d) Ending inventory is $100,000.

Step by step solution

01

Calculation of gross profit on sales in case (b)

Gross profit on sales is calculated as follows:

Grossprofitpercentageonsales=Percentagemarkuponcost100%+Percentagemarkuponcost=60%100%+60%=37.50%

02

Calculation of gross profit on sales in case (d)

Gross profit on sales is calculated as follows:

Grossprofitpercentageonsales=Percentagemarkuponcost100%+Percentagemarkuponcost=25%100%+25%=20%

03

Calculation of ending inventory

Ending inventory is calculated as follows:


(a)

(b)

(c)

(d)

Beginning inventory

$600,000

$600,000

$600,000

$600,000

Purchases

1,500,000

1,500,000

1,500,000

1,500,000

Total goods available for sale (A)

$2,100,000

$2,100,000

$2,100,000

$2,100,000






Sales Revenue

$2,500,000

$2,500,000

$2,500,000

$2,500,000

Gross Profit (Sales Revenue*Gross Profit Percentage)

$1,125,000

$937,500

$875,000

$500,000

Cost of goods sold (B)

$1,375,000

$1,562,500

$1,625,000

$2,000,000






Ending inventory (A-B)

$725,000

$537,500

$475,000

$100,000

Thus, ending inventory equals $725,000, $537,500, $475000 and $100,000.

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Most popular questions from this chapter

Gross Profit Method) Each of the following gross profit percentages is expressed in terms of cost. 1. 20%. 3. 331 /3%. 2. 25%. 4. 50%. Instructions Indicate the gross profit percentage in terms of sales for each of the above.

Mark Price Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May. Inventory, May 1 $ 160,000 Purchases (gross) 640,000 Freight-in 30,000 Sales revenue 1,000,000 Sales returns 70,000 Purchase discounts 12,000 Instructions (a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales. (b) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost.

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A fire destroys all of the merchandise of Assante Company on February 10, 2017. Presented below is information compiled up to the date of the fire. Inventory, January 1, 2017 $ 400,000 Sales revenue to February 10, 2017 1,950,000 Purchases to February 10, 2017 1,140,000 Freight-in to February 10, 2017 60,000 Rate of gross profit on selling price 40% What is the approximate inventory on February 10, 2017?
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