Question

Marigold Corporation’s retail store and warehouse closed for an entire weekend while the year-end inventory was counted. When the count was finished, the controller gathered all the count books and information from the clerical staff, completed the ending inventory calculations, and prepared the following partial income statement for the general manager for Monday morning:

Sales					$	2,743,000
Beginning inventory		$	654,000
Purchases			1,540,000
Total goods available for sale			2,194,000
Less ending inventory			654,000
Cost of goods sold						1,540,000
Gross profit					$	1,203,000

The general manager called the controller into her office after quickly reviewing the preliminary statements. “You’ve made an error in the inventory,” she stated. “My pricing all year has been carefully controlled to provide a gross profit of 35%, and I know the sales are correct.”

(a)

Marigold Corporation’s retail store and warehouse closed for an entire weekend while the year-end inventory was counted. When the count was finished, the controller gathered all the count books and information from the clerical staff, completed the ending inventory calculations, and prepared the following partial income statement for the general manager for Monday morning:

Sales					$	2,743,000
Beginning inventory		$	654,000
Purchases			1,540,000
Total goods available for sale			2,194,000
Less ending inventory			654,000
Cost of goods sold						1,540,000
Gross profit					$	1,203,000

The general manager called the controller into her office after quickly reviewing the preliminary statements. “You’ve made an error in the inventory,” she stated. “My pricing all year has been carefully controlled to provide a gross profit of 35%, and I know the sales are correct.”

(a)

How much should the ending inventory have been?

Expected ending inventory

$enter the Expected ending inventory in dollars

How much should the ending inventory have been?

Expected ending inventory

$enter the Expected ending inventory in dollars

Answer 1

			Gross Profit Ratio
Sales		$            2,743,000
Beginning Inventory	$                 654,000
Purchases	$              1,540,000
Total Goods available for sale	$              2,194,000
Less:ending inventory	$                 654,000
Cost of Goods Sold		$            1,540,000
Gross Profit		$            1,203,000	44%	(Gross Profit/Sales) X 100
Gross Profit		$                960,050	35%
Difference in Gross Profit		$                242,950
Ending inventory		$                654,000
Difference in Gross Profit		$                242,950
Expected Inventory		$                411,050