Question

    1. The net sales for Windmill Boatworks from January 1 until June 30 amount to $460,000. Gross profit has historically been 30% of net sales. Goods available for sale from January 1 until June 30 amount to $400,000. What is the estimated cost of the inventory on June 30 based on the gross profit method?

Answer 1

Cost of Goods Available for Sale = Beginning value of inventory + Cost of goods produced or purchased in that period

And Cost of Goods Sold= Cost of Goods Available for Sale - Ending value of inventory.

As we know,

Net sales	4,60,000.00	Given
Cost of goods sold	3,22,000.00	Balancing figure (Net sales- gross profit)
Gross profit	1,38,000.00	30% of net sales

Since Cost of Goods Sold= Cost of Goods Available for Sale - Ending value of inventory.

where, Cost of goods sold= $ 322,000

Goods available for Sale = $ 400,000

Therefore, Cost of Goods Sold= Cost of Goods Available for Sale - Ending value of inventory.

$ 322,000 = $400,000- Ending value of inventory

Ending value of inventory = $400,000- $ 322,000

Ending value of inventory = $ 78,000

Hence, cost of inventory on June 30 = $ 78,000