For the last several years Conway Corporation has operated with a gross profit r
ID: 2797521 • Letter: F
Question
For the last several years Conway Corporation has operated with a gross profit rate of 58%. On January 1 of the current year, the company had on hand inventory with a cost of $800,000. Purchases of merchandise during January amounted to $130,000, and sales for the month were $520,000. Using the gross profit method, what is the estimated inventory at January 31?
$520,000.
$218,400.
$301,600.
$711,600.
For the last several years Conway Corporation has operated with a gross profit rate of 58%. On January 1 of the current year, the company had on hand inventory with a cost of $800,000. Purchases of merchandise during January amounted to $130,000, and sales for the month were $520,000. Using the gross profit method, what is the estimated inventory at January 31?
Explanation / Answer
Calculation of estimated inventory at January 31:
= $(800,000+130,000) - ((1.00-58%) * $520,000 = $711,600
Option D. $711,600