Problem 6-10AB Gross profit method P4 Wayward Company wants to prepare interim f

Question

Problem 6-10AB Gross profit method P4 Wayward Company wants to prepare interim financial statements for the first quarter. The company wishes to avoid making a physical count of inventory. Wayward’s gross profit rate averages 34%. The following information for the first quarter is available from its records. January 1 beginning inventory $ 302,580 Cost of goods purchased 941,040 Sales 1,211,160 Sales returns 8,410 Required Use the gross profit method to estimate the company’s first-quarter ending inventory. Check Estimated ending inventory, $449,805

Explanation / Answer

Solution - Calculation of Ending Inventory

Wayward Company

Ending Inventory March 31

($1243620 - $793815)

Particulars Amount January 1 Beginning Inventory $302580 Add : Cost of Goods Purchased $941040 Cost of goods available for sale $1243620 Less : Estimated cost of goods sold Sales $1211160 Less : Sales Return $8410 Net Sales $1202750 Less : Gross Profit ($1202750*34%) $408935 $793815

Ending Inventory March 31

($1243620 - $793815)

$449805

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