On December 31, a Company Needed to Estimate Its Ending

question 146

Multiple Choice

On December 31, a company needed to estimate its ending inventory to prepare its fourth quarter financial statements. The following information is currently available: Inventory as of October 1: $12,500
Net sales for fourth quarter: $40,000
Net purchases for fourth quarter: $27,500
The company typically achieves a gross profit ratio of 15%. Ending Inventory under the gross profit method would be:

• A)$4,000
• B)$6,000
• C)$10,000
• D)$16,000
• E)$34,000

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Definitions:

Latin Word

A term originating from Latin, a classical language that has contributed to many words in modern languages, especially in science, law, and medicine.

Knowledge

Facts, information, and skills acquired through experience or education; awareness or familiarity gained by experience of a fact or situation.

Risk Sharing

The practice of distributing potential risks among different parties to minimize the impact on any single participant.

Insurance

A contractual arrangement in which one party, the insurer, agrees to compensate another, the insured, for specific losses or damages in exchange for premiums.