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    Gross Profit Method: Inventory and Sales Costs Ernst Equipment

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    Ernst Equipment Co. wants to prepare interim financial statements for the first quarter. The wishes to avoid making a physical count of inventory. Ernst's gross profit rate averages following information for the first quarter is available from its records:

    January 1 beginning inventory . . . . . . . $ 752,880
    Cost of goods purchased . . . . . . . . . . . 2,159,630
    Sales . . . . . . . . . . . . . . . . . . . . . . . . . ... 3,710,250
    Sales returns . . . . . . . . . . . . . . . . . . . . 74,200

    Use the gross profit method to estimate the company's first quarter ending inventory.

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    https://brainmass.com/business/accounting/gross-profit-method-inventories-cost-sales-ernst-equipment-191604

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    ERNST EQUIPMENT CO.
    Estimated Inventory at March 31
    At Cost At ...

    Solution Summary

    This tutorial provides guidelines on using the gross profit method to estimate Ernst Equipment's first quarter ending inventory.

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