EX 7-24 Gross profit method

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

Sales (net)                                         $2,080,000
Estimated gross profit rate                          37%
Beginning merchandise inventory       $ 75,000
Purchases (net)                                   1,325,000
Merchandise available for sale        $1,400,000

Answer:
Merchandise available for sale .......................................................... $1,400,000
Less cost of merchandise sold [$2,080,000 × (100% – 37%)]..........   1,310,400
Estimated ending merchandise inventory........................................       $ 89,600

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