Question

In: Accounting

Part A Jay Company provides you with the following information for the current accounting period:            ...

Part A

Jay Company provides you with the following information for the current accounting period:

            Sales (net)                                                       $400,000

            Beginning inventory at cost                                    80,000

            Purchases (net)                                                230,000

Required:

  1. Assuming gross profit is 40% of sales, compute an estimate of Jay Company’s ending inventory.
  2. Assuming gross profit is 40% of cost, compute an estimate of Jay Company’s ending inventory.

Solutions

Expert Solution

a.
Beginning Inventory $           80,000
Add: Purchases $       2,30,000
(i) Cost of goods available for sale $ 3,10,000
Sales $       4,00,000
Less: Gross profit ($400000 X 40%) $       1,60,000
(ii) Cost of goods sold $ 2,40,000
(i) - (ii) Ending Inventory $     70,000
b.
Beginning Inventory $           80,000
Add: Purchases $       2,30,000
(i) Cost of goods available for sale $ 3,10,000
Sales $       4,00,000
Less: Gross profit [$400000*[1/(100/40 + 1)]] $       1,14,286
(ii) Cost of goods sold $ 2,85,714
(i) - (ii) Ending Inventory $     24,286

ekkarill92 answered 3 years ago
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