Exercise 9-19 Presented below is information related to Ivanhoe Corporation for

Question

Exercise 9-19 Presented below is information related to Ivanhoe Corporation for the current year. Beginning inventory Purchases Total goods available for sale Sales revenue $ 593,500 1,523,600 $2,117,100 2,460,000 Compute the ending inventory, assuming that (a) gross profit is 47% of sales, (b) gross profit is 60% of cost, (c) gross profit is 33% of sales, and (d) gross profit is 25% of cost. (Round ratios for computational purposes to 1 decimal place, e.g. 78.796 and final answers to 0 decimal places, e.g 28,987.) Ending Inventory (a) Gross profit is 47% of sales (b) Gross profit is 60% of cost (c) Gross profit is 33% of sales (d) Gross profit is 25% of cost

Explanation / Answer

the following is the table with calculations:

note:

ending inventory = total goods available for sale - cost of goods sold

a.cost of goods sold = sales*(1 - gross profit) =>2,460,000 * (1 - 0.47)

=>$2,460,000 * 0.53 =>$1,303,800.

=>$2,117,100 - 1,303,800

=>$813,300.

b. cost of goods sold = sales revenue - gross profit

here,

sales revenue = cost + 0.60* cost...............(since gross profit is 60% of cost).

=> 2,460,000 = 1.6 cost

=> cost = $1,537,500.

=> gross profit = 0.6* cost => $1,537,500 * 0.60 =>$922,500.

now,

ending inventory = total goods available for sale - cost of goods sold

=>2,117,100 - 1,537,500

=>$579,600.

c.Gross profit is 33% of sales.

cost of goods sold = sales * (1 - gross profit %)

=> 2,460,000 * ( 1 - 0.33)

=>$1,648,200.

ending inventory = total goods available for sale - cost of goods sold

=>$2,117,100 -1,648,200

=>$468,900.

d. gross profit is 25% of cost.

sales revenue = cost + 25% of cost................(since gross profit is 25% of cost)

=>$2,460,000 = 1.25 cost

=>cost of goods sold = $2460000/1.25 =>$1,968,000.

ending inventory = goods available for sale - cost of goods sold

=>$2,117,100 - 1,968,000

=>$149,100.

a.Gross profit is 47% of sales $813,300 b.Gross profit is 60% of cost $579,600 c.Gross proft is 33% of sales $468,900 d. Gross profit is 25% of cost $149,100

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