In: Accounting
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 the company's
warehouses.
Required:
1. Calculate the estimated inventory at the end of
November, assuming a gross profit ratio of 35%.
2. Calculate the estimated inventory at the end of
November, assuming a markup on cost of 100%.
Calculate the estimated inventory at the end of November, assuming a gross profit ratio of 35%.
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Calculate the estimated inventory at the end of November, assuming a markup on cost of 100%.
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Answer of part 1:
Answer of Part 2:
Gross Profit, % of Sales = Gross Profit, % of Cost / (100% +
Gross Profit, % of Cost)
Gross Profit, % of Sales = 100% / (100% + 100%)
Gross Profit, % of Sales = 100% / 200%
Gross Profit, % of Sales = 50%