Question

Ivanhoe, Inc. estimates the cost of its physical inventory at March 31 for use in an interim financial statement. The rate of markup on cost is 20%. The following account balances are available: Inventory, March 1 $540000 Purchases 420000 Purchase returns 10000 Sales during March 720000 The estimate of the cost of inventory at March 31 would be $240000. $350000. $230000. $360000.

Answer 1

$ 410,000

Step-by-step explanation:

Mark Up = 20% or 1/5

Therefore margin = 1/ 5 -1 = 1/4

Trading Account for the Month Ended March 31

Sales 720000

Less Cost of Sales

Opening Inventory $540000

Add Purchases 420000

Less Purchases Returns (10000)

Less Closing Inventory 410,000 540,000

Gross Profit 180,000