On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements. The following information is available: Beginning inventory, January 1: $4,700 Net sales: $76,000 Net purchases: $74,000 The company's gross margin ratio is 20%. Using the gross profit method, the estimated ending inventory value would be:

The estimated ending inventory by the gross profit method is $19,900

Explanation:

In order to calculate the estimated ending inventory value we would have to calculate first the following:

Step 1- Calculating Gross profit:

Gross profit ratio = Gross profit/ Sales

20% = Gross profit/ $76,000

Gross profit = $76,000 x 20%

Gross profit = $76,000 x 20%

Gross profit = $15,200

Step 2- Calculating Cost of Goods sold (COGS):

Sales - COGS = Gross profit

$76,000 - COGS = $15,200

COGS = $76,000 - $15,200

COGS = $60,800

Step 3- Calculating Ending Inventory:

COGS = Beginning inventory + Inventory purchases - Ending inventory

$60,800 = $4,700 + $76,000  - Ending inventory

$60,800 = $80,700 - Ending inventory

Ending inventory = $80,700 -$60,800

Ending inventory = $19,900

Therefore,  the estimated ending inventory by the gross profit method is $19,900.

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

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