20. Reyes Company had a gross profit of $620,000, total purchases of $840,000, a

Question

20. Reyes Company had a gross profit of $620,000, total purchases of $840,000, and an ending inventory of S480,000 in its first year of operations as a retailer. Reyes's sales in its first year must have been A) $980,000 B) $1,120,000. C) $360,000. D) $1,100,000. 21. Kesler, Inc. estimates the cost of its physical inventory at March 31 for use in an interim financial statement. The rate of markup on cost is 25%. The following account balances are available: Inventory, March 1 S550,000 Purchases Purchase returns Sales during March 750,000 The estimate of the cost of inventory at March 31 would be A) $210,000. B) $360,000. C) S397,500. D) $280,000. 430,000 20,000 Page 9

Explanation / Answer

20 Sales = Cost of goods sold+Gross Profit = (840000-480000)+620000= 980000 Option A is correct 21 Inventory March 1 550000 Add: Purchases 430000 Less: Purchase returns -20000 Cost of goods available 960000 Less: Cost of goods sold 600000 =750000/125*100 Ending inventory 360000 Option B is correct

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