### Wayward Company Inventory Estimation for the First Quarter**Objective:** Wayward Company intends to prepare interim financial statements for the first quarter without conducting a physical inventory count. The company has a historical gross profit rate of 40%. The available financial data for the first quarter is as follows:- **Beginning inventory, January 1:** $430,260- **Cost of goods purchased:** $1,069,050- **Sales:** $1,321,150- **Sales returns:** $10,750**Task:** Estimate the company's ending inventory for the first quarter using the gross profit method.**Calculation Details:**1. **Beginning Inventory, January 1:** - $430,2602. **Net Cost of Goods Purchased:** - $1,069,0503. **Cost of Goods Available for Sale:** $ \text{Beginning Inventory} + \text{Net Cost of Goods Purchased} = 430,260 + 1,069,050 = 1,499,310 $4. **Estimated Cost of Goods Sold:** - Calculated using the gross profit rate: - Gross profit = 40% of sales = $ 0.40 \times 1,321,150 = 528,460 $ - Cost of Goods Sold (COGS) = Sales - Gross Profit = $ 1,321,150 - 528,460 = 792,690 $5. **Estimated March 31 Inventory:** $ \text{Cost of Goods Available for Sale} - \text{Estimated Cost of Goods Sold} = 1,499,310 - 792,690 = 706,620 $Using the gross profit method, the estimated ending inventory as of March 31 is **$706,620**.This method provides an efficient estimate of inventory without a physical count, using historical financial data and trends.

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Description: ### Wayward Company Inventory Estimation for the First Quarter**Objective:** Wayward Company intends to prepare interim financial statements for the first quarter without conducting a physical inventory count. The company has a historical gross pro

The Gross Profit Method, sometimes called the Gross Method, is an accounting technique used to…

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Wayward Company wants to prepare interim financial statements for the first quarter. The company wishes to avoid making a physical count of inventory. Wayward's gross profit rate averages 40%. The following information for the first quarter is available from its records. Beginning inventory, January 1 Cost of goods purchased Sales Sales returns Required: Use the gross profit method to estimate the company's first-quarter ending inventory. Beginning inventory, January 1 Net cost of goods purchased Cost of goods available for sale Estimated cost of goods sold Estimated March 31 inventory $ $ 430,260 1,069,050 1,321,150. 10,750 $ 430,260 1,069,050 1,499,310 786,240

Wayward Company wants to prepare interim financial statements for the first quarter. The company wishes to avoid making a physical count of inventory. Wayward's gross profit rate averages 40%. The following information for the first quarter is available from its records. Beginning inventory, January 1 Cost of goods purchased Sales Sales returns Required: Use the gross profit method to estimate the company's first-quarter ending inventory. Beginning inventory, January 1 Net cost of goods purchased Cost of goods available for sale Estimated cost of goods sold Estimated March 31 inventory $ $ 430,260 1,069,050 1,321,150. 10,750 $ 430,260 1,069,050 1,499,310 786,240

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter6: Inventories

Section: Chapter Questions

Problem 4TIF: Communication Golden Eagle Company began operations on April 1 by selling a single product. Data on...

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

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### Wayward Company Inventory Estimation for the First Quarter

**Objective:**
Wayward Company intends to prepare interim financial statements for the first quarter without conducting a physical inventory count. The company has a historical gross profit rate of 40%. The available financial data for the first quarter is as follows:

- **Beginning inventory, January 1:** $430,260
- **Cost of goods purchased:** $1,069,050
- **Sales:** $1,321,150
- **Sales returns:** $10,750

**Task:**
Estimate the company's ending inventory for the first quarter using the gross profit method.

**Calculation Details:**

1. **Beginning Inventory, January 1:**
- $430,260

2. **Net Cost of Goods Purchased:**
- $1,069,050

3. **Cost of Goods Available for Sale:**
$ \text{Beginning Inventory} + \text{Net Cost of Goods Purchased} = 430,260 + 1,069,050 = 1,499,310 $

4. **Estimated Cost of Goods Sold:**
- Calculated using the gross profit rate:
- Gross profit = 40% of sales = $ 0.40 \times 1,321,150 = 528,460 $
- Cost of Goods Sold (COGS) = Sales - Gross Profit = $ 1,321,150 - 528,460 = 792,690 $

5. **Estimated March 31 Inventory:**
$ \text{Cost of Goods Available for Sale} - \text{Estimated Cost of Goods Sold} = 1,499,310 - 792,690 = 706,620 $

Using the gross profit method, the estimated ending inventory as of March 31 is **$706,620**.

This method provides an efficient estimate of inventory without a physical count, using historical financial data and trends.

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