Quiz 8: P8: Gross Profit Method GP
The worksheet to estimate ending inventory using the gross profit method is shown below:
The formulas in the worksheet will be entered using cell references when appropriate. Net purchases are calculated by deducting purchases returns and allowances from purchases. Cost of goods available for sale is the total of beginning inventory and net purchases. Net sales are calculated by deducting sales returns and allowances from sales. Gross profit is determined by the historical gross profit percentage of net sales. If gross profit percentage is 40% then we can assume that cost of goods sold is 60% of net sales. Estimated ending inventory is cost of goods available for sales less estimated cost of goods sold. The required worksheet is shown below:
The required worksheet is shown below: The estimated ending inventory on December 21, 2013 is $26,800.