Estimate the cost of the ending merchandise inventory

Based on the following data , estimate the cost of the ending merchandise inventory

Particulars	Amount$
Sales	92,50,000
Estimated Gross profit rate	36%
Beginning merchandise inventory	1,80,000
Purchase (net)	59,45,000
Merchandise available for sale	61,25,000

Solutions

Expert Solution

Gross profit method : The ending inventory for the period is evaluated and determined using this approach to estimate gross profit for the period. The gross profit for the time period is determined based on the prior year, and any current-period adjustments to sales and inventory cost prices are then taken into account.

Calculation cost of ending merchandise inventory

Particulars	Amount$
Merchandise inventory available for sale	61,25,000
Less : Cost of merchandise sold	59,20,000
Estimated ending merchandise inventory	2,05,000

Calculation of estimated gross profit

Estimated gross profit = Sales x Gross profit rate

=$92,50,000 x 36%

= $33,30,000

Calculation of cost of merchandised sold

Cost of merchandise sold = Sales - Estimated gross profit

= $92,50,000 - $33,30,000

= $59,20,000

Therefore, the estimated ending inventory is $2,05,000

balaji rao answered 1 year ago

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