Based on the following data, estimate the cost of the ending merchandise inventory:
Sales $1,450,000
Estimated gross profit rate 42%
Beginning merchandise inventory $ 100,000
Purchases (net) 860,000
Merchandise available for sale $ 960,000
Answer:
Merchandise available for sale......................................................... $960,000
Less cost of merchandise sold [$1,450,000 × (100% – 42%)].................. 841,000
Estimated ending merchandise inventory.......................................... $119,000