As a result of taking a physical inventory count on December 31, 2016, the Mona Lisa Company inventory was determined to be $61,500. The auditors for Mona Lisa suspected an inventory shortage and used the gross profit method to estimate the ending inventory. The accounting records for the company contained the following information: Inventory (1/1/16) $ 130,000 Purchases (2016) 760,000 Sales (2016) 1,020,000 Sales returns (2016) 60,000 Gross profit ratio 25% of sales Using the gross profit method, what did the auditors estimate as the amount of the inventory that should have been on hand at December 31, 2016? a. $170,000 b. $ 61,500 c. $125,000 d. $240,000

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Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.