Wayward Company wants to prepare interim financial statements for the first quar

Question

Wayward Company wants to prepare interim financial statements for the first quarter. The company wishes to avoid making a physical count of inventory. Wayward’s gross profit rate averages 40%. The following information for the first quarter is available from its records.

Wayward Company wants to prepare interim financial statements for the first quarter. The company wishes to avoid making a physical count of inventory. Wayward’s gross profit rate averages 40%. The following information for the first quarter is available from its records.

Explanation / Answer

Use the gross profit method to estimate the company’s first quarter ending inventory. Beginning inventory 470260 Net cost of goods purchased 1109050 Cost of goods available for sale 1579310 Less; Cost of goods sold Sales 1350000 Less: Gross profit -540000 -810000 Estimated March 31 inventory 769310

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