EX 7-23 Gross profit method

Based on the following data, estimate the cost of ending merchandise inventory:

Sales (net)                                                $5,260,000
Estimated gross profit rate                                 40%
Beginning merchandise inventory            $ 180,000
Purchases (net)                                          3,200,000
Merchandise available for sale                $3,380,000

Answer:
Merchandise available for sale .......................................................... $3,380,000
Less cost of merchandise sold [$5,260,000 × (100% – 40%)]..........   3,156,000
Estimated ending merchandise inventory........................................       $ 224,00

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