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    Estimating Ending Inventory. See attached file for full problem description.

    Estimating Ending Inventory: Gross margin Method
    Don Green, owner of Plains Company, is reviewing the quarterly financial statements and thinks the cost of goods sold is out of line with past years. The following historical data is available for 2004 and 2005
    2004 2005
    Net Sales $160,000 $200,000
    Cost of good sold 70,000 90,000
    At the end of the first quarter of 2006, Plains Company's ledger had the following account balances:
    Sales $240,000
    Purchases 160,000
    Beginning Inventory, 01/02/06 $60,000
    Required
    Using the information provided, estimate the following for the first quarter of 2006:
    a. Cost of good sold (Use average cost of goods sold %)
    b. Ending Inventory at 03/31 based on historical cost of goods sold percentage
    c. Inventory shortage if inventory balance as of 03/31 is $100,000
    PROBLEM 6-25A Name: _______________

    Lexington Company

    2004 2005 Total

    Net Sales
    Cost of Goods Sold
    Gross Margin

    Gross Margin %
    Cost of Goods Sold %

    a. Computation of Gross Margin:

    Sales
    Less: Sales Discounts
    Net Sales
    x Gross Margin %
    Gross Margin

    b. Computation of Ending Inventory:

    Beginning Inventory
    Plus: Purchases
    Plus: Transportation-In
    Goods Available for Sale
    Less: Cost of Goods Sold

    Ending Inventory

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    https://brainmass.com/business/inventory/estimating-ending-inventory-141147

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    Estimating Ending Inventory: Gross margin Method
    Don Green, owner of Plains Company, is reviewing the quarterly financial statements and thinks the cost of goods sold is out of line with past years. The following historical data is available for 2004 and 2005
    2004 2005
    Net Sales $160,000 $200,000
    Cost of good sold 70,000 90,000
    At the end of the first quarter of 2006, Plains Company's ledger had the following account balances:
    Sales $240,000
    Purchases 160,000
    Beginning ...

    Solution Summary

    The solution explains how to calculate the ending inventory using the gross margin method

    $2.49

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