Ask Question
3 November, 03:45

On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements. The following information is available: Beginning inventory, January 1: $5,000 Net sales: $50,000 Net purchases: $51,000 The company's gross margin ratio is 15%. Using the gross profit method, the cost of goods sold would be:

$6,000. $26,500. $5,000. $31,500. $42,500.

0
Answers (1)
  1. 3 November, 05:35
    0
    Using the gross profit method, the cost of goods sold would be:

    $42,500

    Explanation:

    Gross margin ratio of the company is 15%. Refer the formula:

    Gross margin = Gross profit/Revenue (or net sales)

    = (Net sales - Cost of good sold) / Net sales

    Using the gross profit method and from the formula,

    Cost of good sold = Net sales - Net sales x Gross margin

    = Net sales x (1 - Gross margin)

    = $50,000 x (1-0.15) = $50,000 x 0.85 = $42,500
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements. The following information ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers