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ernst company?
Ernst Equipment Co. wants to prepare interim financial statements for the first quarter. The company?
The company
wishes to avoid making a physical count of inventory. Ernst’s gross profit rate averages 30%. The
following information for the first quarter is available from its records:
January 1 beginning inventory . . . . . . . $ 752,880
Cost of goods purchased . . . . . . . . . . . 2,159,630
Sales . . . . . . . . . . . . . . . . . . . . . . . . . 3,710,250
Sales returns . . . . . . . . . . . . . . . . . . . . 74,200
1 Answer
- SandyLv 71 decade agoFavorite Answer
Sales $3,710,250 (given)
Sales returns $74,200 (given)
So Net sales = $3,636,050
We're told the co's gross profit rate (or margin) averages 30%.
1st, we work out the gross profit and COGS
Sales (100%) $3,636,050
COGS (70%) $2,545,235
and Gross profit (30%) = $1,090,815
After that, it's easy:
Beginning inventory $752,880 (given)
Goods purchased $2,159,630 (given)
So Goods available = $2,912,510
Cost of goods sold ($2,545,235) (from above)
Therefore Estimated ending inventory = $367,275
