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Discuss the gross profit method

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Question: Ernst Equipment Co. wants to prepare interim financial statements for the first quarter. The company wishes to avoid making a physical count of inventory. Ernst's gross profit rate averages 30%. The 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

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

Reference no: EM131533463

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