Lopez Company uses the gross profit method to estimate ending inventory and cost of goods sold when preparing monthly financial statements required by its bank. Inventory on hand at the end of September was $133,000. The following information for the month of October was available from company records: Purchases Freight-in Sales Sales returns $225,000 5,800 356,000 9,600 Purchases returns In addition, the company discovered that $10,000 of inventory was stolen during October from one of the company's warehouses. 4,900 a. Calculate the estimated inventory at the end of October, assuming a gross profit ratio of 30%. b. What would be the gross profit ratio if the markup on cost was 25%? (Note: Do not recalculate the estimated inventory under this new gross profit ratio.)
Lopez Company uses the gross profit method to estimate ending inventory and cost of goods sold when preparing monthly financial statements required by its bank. Inventory on hand at the end of September was $133,000. The following information for the month of October was available from company records: Purchases Freight-in Sales Sales returns $225,000 5,800 356,000 9,600 Purchases returns In addition, the company discovered that $10,000 of inventory was stolen during October from one of the company's warehouses. 4,900 a. Calculate the estimated inventory at the end of October, assuming a gross profit ratio of 30%. b. What would be the gross profit ratio if the markup on cost was 25%? (Note: Do not recalculate the estimated inventory under this new gross profit ratio.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Lopez Company uses the gross profit
method to estimate ending inventory and
cost of goods sold when preparing
monthly financial statements required by
its bank. Inventory on hand at the end of
September was $133,000. The following
information for the month of October was
available from company records:
Purchases
Freight-in
Sales
Sales returns
$225,000
5,800
356,000
9,600
Purchases returns
In addition, the company discovered that
$10,000 of inventory was stolen during
October from one of the company's
warehouses.
4,900
a. Calculate the estimated inventory at the
end of October, assuming a gross profit
ratio of 30%.
b. What would be the gross profit ratio if
the markup on cost was 25%? (Note: Do
not recalculate the estimated inventory
under this new gross profit ratio.)
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