Stevens Company started the year with an inventory cost of $145,000. During the month of January they purchased inventory that cost of $53,000. January sales totaled $140,000. Estimated gross profit is 35%. The estimated ending inventory as of January 31 is
A) $58,000
B) $91,000
C) $107,000
D) $69,300

Question

Quizplus · Accepted Answer

First, we need to calculate the cost of goods sold (COGS).
COGS = Beginning Inventory + Purchases - Ending Inventory
Since we need to find the ending inventory, we rearrange the formula:
Ending Inventory = Beginning Inventory + Purchases - COGS

Beginning Inventory = $145,000
Purchases = $53,000
COGS = (1-0.35) x $140,000 = $91,000

Ending Inventory = $145,000 + $53,000 - $91,000 = $107,000

Therefore, the estimated ending inventory as of January 31 is $107,000, so the best choice is C.

Stevens Company Started the Year with an Inventory Cost of $145,000