I need some help with this question.?

Question

Ernst Equipment Co. wants to prepare interim financial statements for the first quarter. The company

wishes to avoid making a physical count of inventory. Ernst’s gross profit rate averages 30%. The

following information for the first quarter is available from its records:

January 1 beginning inventory . . . . . . . $ 752,880

Cost of goods purchased . . . . . . . . . . . 2,159,630

Sales . . . . . . . . . . . . . . . . . . . . . . . . . 3,710,250

Sales returns . . . . . . . . . . . . . . . . . . . . 74,200

Required

Use the gross profit method to estimate the company’s first quarter ending inventory.

Answer 1

The company's first quarter ending inventory

= Beginning inventory + Cost of goods purchased - (Sales-Cost of goods purchased) + Sales returns

= Beginning inventory + Cost of goods purchased - cost of goods sold + Sales returns

= $[752880 + 2159630 + (3710250-2159630) + 74200]

= $4537330

Hope this helps. I maybe wrong because I have already got rusty with accounting.(haven't done accounting for a long time).

Answer 2

I've sent the Excel file to the email address you gave me.