Inventory: Inventory refers to the stock or goods which will be sold in the near future and thus is an asset for the company. It comprises of the raw materials which are yet to be processed, the stock which is still going through the process of production and it also includes completed products that are ready for sale. Thus inventory is the biggest and the important source of income and profit for the business. Free on board (FOB) shipping: Under this contract when the goods are placed at the port for the shipment, the ownership of the goods transfers to the buyer. And now the buyer will incur the expenses (freight expense or the transportation expense) or even the loss if anything happens to the goods, from the point of goods placed for delivery. Gross profit method: The method in which the value of the closing stock is deduced by the gross profit and revenue relationship is the gross profit method. To compute: The cost of ending inventory with the use of gross profit method.

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Chapter 5, Problem 17E

To determine

Inventory: Inventory refers to the stock or goods which will be sold in the near future and thus is an asset for the company. It comprises of the raw materials which are yet to be processed, the stock which is still going through the process of production and it also includes completed products that are ready for sale. Thus inventory is the biggest and the important source of income and profit for the business.

Free on board (FOB) shipping: Under this contract when the goods are placed at the port for the shipment, the ownership of the goods transfers to the buyer. And now the buyer will incur the expenses (freight expense or the transportation expense) or even the loss if anything happens to the goods, from the point of goods placed for delivery.

Gross profit method: The method in which the value of the closing stock is deduced by the gross profit and revenue relationship is the gross profit method.

To compute: The cost of ending inventory with the use of gross profit method.

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