Henderson Company uses the gross profit method to estimate ending inventory and cost of goods sold when preparing monthly financial statements required by its bank. Inventory on hand at the end of July was $124,500. The following information for the month of August was available from company records: Purchases Freight-in Sales Sales returns Purchases returns $ 223,000 5,600 354,000 9,400 4,700 In addition, the controller is aware of $11,000 of inventory that was stolen during August from one of the company's warehouses. Required: 1. Calculate the estimated inventory at the end of August, assuming a gross profit ratio of 35%. 2. Calculate the estimated inventory at the end of August, assuming a markup on cost of 25%. Answer is complete but not entirely correct. 1. Estimated ending inventory $ 170,100 2. Estimated ending inventory $ 12,800 X

Henderson Company uses the gross profit method to estimate ending inventory and cost of goods sold when preparing monthly financial statements required by its bank. Inventory on hand at the end of July was $124,500. The following information for the month of August was available from company records: Purchases Freight-in Sales Sales returns Purchases returns $ 223,000 5,600 354,000 9,400 4,700 In addition, the controller is aware of $11,000 of inventory that was stolen during August from one of the company's warehouses. Required: 1. Calculate the estimated inventory at the end of August, assuming a gross profit ratio of 35%. 2. Calculate the estimated inventory at the end of August, assuming a markup on cost of 25%. Answer is complete but not entirely correct. 1. Estimated ending inventory $ 170,100 2. Estimated ending inventory $ 12,800 X

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter8: Gross Profit Method (gp)

Section: Chapter Questions

Problem 1R: On September 30, 2013, the general ledger of Leons Golf Shop, which uses the calendar year as its...

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On September 30, 2013, the general ledger of Leons Golf Shop, which uses the calendar year as its accounting period, showed the following year-to-date account balances: The merchandise inventory account had a 48,000 balance on January 1, 2013. The historical gross profit percentage is 40%. Leon prepares quarterly financial statements and takes physical inventory once a yearat the end of the accounting period. In order to prepare the financial statements for the third quarter, the store needs to have an estimate of ending inventory. You have been asked to use the gross profit method to estimate the ending inventory. Review the worksheet called GP. Study it carefully because it may have a solution format somewhat different from the one shown in your textbook.
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