14. Presented below is information related to Jerrold Corporation for the cur-rent year.
Beginning inventory £ 600,000
Purchases 1,500,000
Total goods available for sale £2,100,000
Sales 2,300,000
Instructions Compute the ending inventory, assuming that (a) gross profit is 40% of sales, (b) gross profit is
60% of cost, (c) gross profit is 35% of sales, and (d) gross profit is 25% of cost.
(a)
Gross Profit = 40% of Sales
Gross Profit = 0.40 x £2,300,000 = £920,000
Cost of Goods Sold = Sales - Gross Profit
Cost of Goods Sold = £2,300,000 - £920,000 = £1,380,000
Ending Inventory = Beginning Inventory + Purchases - Cost of Goods Sold
Ending Inventory = £600,000 + £1,500,000 - £1,380,000 = £720,000
(b)
Gross Profit = 60% of Cost
Gross Profit = 0.60 x £1,380,000 = £828,000
Ending Inventory = Beginning Inventory + Purchases - Cost of Goods Sold
Ending Inventory = £600,000 + £1,500,000 - £1,380,000 = £720,000
(c)
Gross Profit = 35% of Sales
Gross Profit = 0.35 x £2,300,000 = £805,000
Cost of Goods Sold = Sales - Gross Profit
Cost of Goods Sold = £2,300,000 - £805,000 = £1,495,000
Ending Inventory = Beginning Inventory + Purchases - Cost of Goods Sold
Ending Inventory = £600,000 + £1,500,000 - £1,495,000 = £605,000
(d)
Gross Profit = 25% of Cost
Gross Profit = 0.25 x £1,380,000 = £345,000
Cost of Goods Sold = Sales - Gross Profit
Cost of Goods Sold = £2,300,000 - £345,000 = £1,955,000
Ending Inventory = Beginning Inventory + Purchases - Cost of Goods Sold
Ending Inventory = £600,000 + £1,500,000 - £1,955,000 = £145,000