A company's beginning inventory is $160,000, its net purchases are $260,000, and its net sales total $430,000. Its normal gross profit percentage is 35% of sales. Using the gross profit method, how much is ending inventory?

$140,500

Explanation:

First, we need to determine cost of goods available for sale.

$160,000 beginning inventory + $260,000 net purchases = $420,000 cost of goods available for sale.

We also calculate estimated cost of goods sold

(1 - 35%) × $430,000 = $297,500 cost of goods sold

Ending inventory = Cost of goods available for sale - Cost of goods sold

= $420,000 - $297,500

= $140,500

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