Over the past several years, Landmark Supplies has averaged a gross profit of 34%. At the end of 20--, the income statement of the company included the information shown below: Sales $1,100,000 Cost of goods sold: Merchandise inventory, January 1, 20-- $67,000 Purchases 840,000 Goods available for sale $907,000 Less merchandise inventory, December 31, 20-- 130,000 Cost of goods sold 777,000 Gross profit on sales $323,000 Investigation revealed that employees of the company had not taken an actual physical count of the inventory on December 31, 20--. Instead, they had merely estimated the inventory.Required:Under the gross profit method of inventory estimation, determine the following items to check the accuracy of the employees' estimates. Gross profit on sales ?Cost of goods sold ?Ending inventory ?

Gross profit on sales = Sales x estimated gross profit rate = $1,100,000 x 34% = $374,000

Answered: Over the past several years, Landmark…

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Chapter15: Financial Statement Analysis

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Over the past several years, Landmark Supplies has averaged a gross profit of 34%. At the end of 20--, the income statement of the company included the information shown below:

Sales		$1,100,000
Cost of goods sold:
Merchandise inventory, January 1, 20--	$67,000
Purchases	840,000
Goods available for sale	$907,000
Less merchandise inventory, December 31, 20--	130,000
Cost of goods sold		777,000
Gross profit on sales		$323,000

Investigation revealed that employees of the company had not taken an actual physical count of the inventory on December 31, 20--. Instead, they had merely estimated the inventory.

Required:

Under the gross profit method of inventory estimation, determine the following items to check the accuracy of the employees' estimates.

Gross profit on sales		?
Cost of goods sold		?
Ending inventory		?

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