Big Box Store has operated with a 30% average gross profit ratio for a number of years. It had $100,000 in sales during the second quarter of this year. If it began the quarter with $18,000 of inventory at cost and purchased $72,000 of inventory during the quarter, its estimated ending inventory by the gross profit method is:
A) $30,000.
B) $21,000.
C) $20,000.
D) $18,000.
E) $27,000.
C) $20,000.
Explanation: COGS = $100,000 * 70% = $70,000
Costs available for sale = $18,000 + $72,000 = $90,000
End. Inv. = $90,000 - $70,000 = $20,000
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