Wayward Company wants to prepare interim financial statement

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 30%. The following information for the first quarter is available from its records. January 1 beginning inventory $ 450,260 Cost of goods purchased 1,089,050 Net sales 1,330,200 Required: Use the gross profit method to estimate the company\'s first-quarter ending inventory.

Solution

Company\'s first-quarter ending inventory = $608,170

Wayward Company

Estimated Ending Inventory Statement

(a) Goods available for sale

Beginning Inventory

$450,260

Cost of goods purchased

10,89,050

15,39,310

(b) Sales

13,30,200

(c) Cost of Goods Sold [ 13,30,200 x ( 1 – 0.30 ) ]

931,140

(d) Ending inventory [ 15,39,310 - 931,140 ]

608,170