Question
In: Accounting
describe the information a company must have available in order to use the gross profit method...
describe the information a company must have available in order to use the gross profit method for estimating ending inventory. Explain in detail
Solutions
Expert Solution
Gross profit method of inventory is used to calculate the value of inventory at the end of the period. Though we are required to have some information for the calculation of ending inventory using this method.
First of all we should have the Gross profit margin ratio. For example if any concern purchased goods for $ 8 and sells it for $ 10 , than gross profit margin will be $ 2. Gross profit margin ratio is used to calculate the cost of goods sold if value of sales is given. Taking above example as base if sales value is $ 10 and Gross profit ratio is 2% than cost of goods sold will be $ 10- $ 10*2%= $ 8
Now , further we require beginning value of inventory and total purchases during the period and sales during the period .
Continuing the above example, if inventory in the beginning is $ 100 and purchases made during the period is $ 500 , than cost of good available is $ 100+ $ 500=$ 600.
Now, sales during the period if $ 650 , than cost of good sold=650*80=$ 520
Estimated inventory at the end = $ 600-520= $ 80
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Royal Gorge Company uses the gross profit method to estimate
ending inventory and cost of goods sold when preparing monthly
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of November was available from company records: Purchases$126,000 Freight-in4,600 Sales260,000 Sales returns7,500 Purchases returns6,500In addition, the controller is aware of $7,500 of inventory that
was stolen during November from one of the company’s
warehouses.1.Calculate the estimated inventory at the end of November,
assuming...
Royal Gorge Company uses the gross profit method to estimateending inventory and cost of goods...
Royal Gorge Company uses the gross profit method to estimate
ending inventory and cost of goods sold when preparing monthly
financial statements required by its bank. Inventory on hand at the
end of October was $60,100. The following information for the month
of November was available from company records:Purchases$126,000Freight-in4,600Sales260,000Sales returns7,500Purchases returns6,500In addition, the controller is aware of $7,500 of inventory that
was stolen during November from one of the company's
warehouses.Required:1. Calculate the estimated inventory at the end of
November,...
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Henderson Company uses the gross profit method to estimate ending inventory and cost of goods sold...
Henderson Company uses the gross profit method to estimate
ending inventory and cost of goods sold when preparing monthly
financial statements required by its bank. Inventory on hand at the
end of July was $125,000. The following information for the month
of August was available from company records:
Purchases
$
224,000
Freight-in
5,700
Sales
355,000
Sales returns
9,500
Purchases returns
4,800
In addition, the controller is aware of $12,000 of inventory that
was stolen during August from one of the...
Henderson Company uses the gross profit method to estimate ending inventory and cost of goods sold...
Henderson Company uses the gross profit method to estimate
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financial statements required by its bank. Inventory on hand at the
end of July was $122,000. The following information for the month
of August was available from company records: Purchases $ 218,000
Freight-in 5,100 Sales 349,000 Sales returns 8,900 Purchases
returns 4,200 In addition, the controller is aware of $12,000 of
inventory that was stolen during August from one of the...
Royal Gorge Company uses the gross profit method to estimate ending inventory and cost of goods...
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ending inventory and cost of goods sold when preparing monthly
financial statements required by its bank. Inventory on hand at the
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of November was available from company records:
Purchases
$
118,000
Freight-in
3,800
Sales
220,000
Sales returns
9,000
Purchases returns
8,000
In addition, the controller is aware of $12,000 of inventory that
was stolen during November from one of...
Royal Gorge Company uses the gross profit method to estimate ending inventory and cost of goods...
Royal Gorge Company uses the gross profit method to estimate
ending inventory and cost of goods sold when preparing monthly
financial statements required by its bank. Inventory on hand at the
end of October was $59,100. The following information for the month
of November was available from company records:
Purchases
$
116,000
Freight-in
3,600
Sales
210,000
Sales returns
8,000
Purchases returns
7,000
In addition, the controller is aware of $11,000 of inventory that
was stolen during November from one of...
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