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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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The following information is available for Silver Company for the three months ended March 31, 2019:

Chapter 8, Problem 4MC, The following information is available for Silver Company for the three months ended March 31, 2019:

The gross margin recorded was 25% of sales. What should be the merchandise inventory at March 31, 2019?

  1. a. $700,000
  2. b. $1,125,000
  3. c. $900,000
  4. d. $1,200,000

To determine

Calculate the cost of merchandise inventory at March 31, 2019 by using the gross profit method.

Explanation

Gross Profit Method: Under this method, the beginning inventory is added to the net purchases during the period which results in the goods available for sale. Then, the estimated cost of goods sold is deducted from the goods available for sale to estimate the ending inventory.

Calculate the cost of merchandise inventory at March 31, 2019 by using the gross profit method:

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