Answer :
Answer:
The estimated Inventory is $376,000.00, which is equal to the difference between cost of goods available for sale and cost of goods sold.
Explanation:
The cost of goods available for sale is made of Beginning Inventory $538,000 and Net Purchases $410,000 (418,000 Purchase - 8,000 Purchase Returns).
The cost of goods sold is 100% of Sales of $714,000, using a markup on cost of 25%. This implies that Sales represent 100+25%, = 125%.
Cost of goods sold is therefore $714,000/125 x 100, which is equal to $571,200.
A summary of Trading Account is attached to illustrate the above workings.
Answer:
$376,800
Explanation:
Mark up is the profit on cost i.e it is the amount added to cost to get the selling price of a commodity. As such, were the markup is known and the sales, the cost of goods sold can be determined as
Mark up = (sales - cost of sales)/cost of sales
If the cost of sales is U
0.25 = ($714,000 - U)/U
1.25U = $714,000
U = $571,200
The movement in the balance of inventory at the start and end of a period is as a result of sales and purchases. While sales reduces the balance in inventory, purchases increases the balance. This may be expressed mathematically as
Opening balance + purchases less returns - cost of goods sold = closing balance
$538,000 + $418,000 - $8,000 - $571,200 = Closing balance
Closing balance which is the cost of inventory at March 31 would be
= $376,800