volcano technology began the year with inventory of $275,000 and purchased $1,850,000 of goods during the…

volcano technology began the year with inventory of $275,000 and purchased $1,850,000 of goods during the year. sales for the year are $2,600,000, and volcano technologys gross profit percentage is 40% of sales. calculate volcano technologys estimated cost of ending inventory by using the gross profit method.\n\nyou will check your answer after each section of the computation before moving on to the next section. start with calculating the cost of goods available. then you will complete the computation through the estimated cost of ending inventory.\n\ncost of goods available

volcano technology began the year with inventory of $275,000 and purchased $1,850,000 of goods during the year. sales for the year are $2,600,000, and volcano technologys gross profit percentage is 40% of sales. calculate volcano technologys estimated cost of ending inventory by using the gross profit method.\n\nyou will check your answer after each section of the computation before moving on to the next section. start with calculating the cost of goods available. then you will complete the computation through the estimated cost of ending inventory.\n\ncost of goods available

Answer

Explanation:

Step1: Calculate cost - of - goods available

Cost of goods available = Beginning inventory + Purchases $= 275000 + 1850000$ $= 2125000$

Step2: Calculate cost of goods sold

Gross profit percentage = 40% of sales. So cost of goods sold percentage = 1 - Gross profit percentage = 1 - 0.4 = 0.6 Cost of goods sold = Sales × Cost of goods sold percentage $= 2600000×0.6$ $= 1560000$

Step3: Calculate estimated cost of ending inventory

Estimated cost of ending inventory = Cost of goods available - Cost of goods sold $= 2125000 - 1560000$ $= 565000$

Answer:

565000