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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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Kay’s Beauty Supply uses the gross profit method to estimate the cost of ending inventory for in-house interim financial statements. Based on the following information for March, calculate Kay’s’ ending inventory at March 31.

Chapter 8, Problem 6RE, Kays Beauty Supply uses the gross profit method to estimate the cost of ending inventory for

To determine

Compute the ending inventory of K’s on March 31 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.

Compute the ending inventory of K’s on March 31 by using the gross profit method.

Estimation of  Inventory – Gross Profit method
At March 31
DetailsAmount ($)Amount ($)
Cost of goods available for sale (A) 125,000
Less: Estimated cost of goods sold:  
         Net sales80,000 
         Gross profit rate

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