Wade Company Prepares Monthly Financial Statements and Uses the Gross

question 250

Multiple Choice

Wade Company prepares monthly financial statements and uses the gross profit method to estimate ending inventories. Historically, the company has had a 40% gross profit rate. During June, net sales amounted to $80,000; the beginning inventory on June 1 was $24,000; and the cost of goods purchased during June amounted to $36,000. The estimated cost of Wade Company's inventory on June 30 is

• A) $12,000.
• B) $48,000.
• C) $20,000.
• D) $32,000.

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Definitions:

Credit Sales

Transactions where the customer purchases goods or services on credit and pays the seller at a later date.

Bank Credit Cards

Payment cards issued by banks that allow cardholders to borrow funds within a pre-approved limit for purchases or cash advances.

Freight-In

The cost associated with transporting raw materials or goods into a facility, typically considered as part of the inventory cost.

Cost of Goods Sold

The total cost of materials and labor directly involved in producing goods sold by a company during a specific period.