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National distributing company uses a periodic inventory system to track its merchandise inventory and the gross profit method to estimate ending inventory and cost of goods sold for interim periods. net purchases for the month of august were $43,000. the july 31 and august 31, 2021, financial statements contained the following information:

income statements for the months ending
august 31, 2021 july 31, 2021
net sales $60,000 $50,000
balance sheets at
august 31, 2021 july 31, 2021
assets:
merchandise inventory $35,000 $34,000

required:
determine the company's cost percentage.

Sagot :

anthougo

The determination of the National Distributing Company's cost percentage under the gross profit method of estimating ending inventory and the cost of goods sold is 70%.

What is the gross profit method?

Under the gross profit method, the cost of ending inventory and the cost of goods sold are estimated in each by following the following steps:

  • Add the cost of beginning inventory to the cost of purchases during the period to arrive at the cost of goods available for sale.

  • Multiply (1 - expected gross profit percent, if given) by sales during the period to arrive at the estimated cost of goods sold.

  • Otherwise, if you have the estimated cost of goods sold, you can use the figure to work out the gross profit percentage.  Then work out the ending inventory by subtracting the cost of goods sold from the cost of goods available for sale.

Data and Calculations:

Net Purchases for August = $43,000

National Distributing Company

Income Statements

For the months ending August 31, 2021, and July 31, 2021:

                     August      July

Net sales    $60,000    $50,000

National Distributing Company

Balance sheets

At August 31, 2021 July 31, 2021

Assets:                              August      July

Merchandise inventory $35,000  $34,000

Cost of goods available for sale for August:

Beginning inventory (July)  $34,000

Purchases                              43,000

Cost of goods available     $77,000

Ending inventory                 (35,000)

Cost of goods sold            $42,000

Company's cost of goods sold percentage = 70% ($42,000/$60,000 x 100)

Learn more about the gross profit percent method at https://brainly.com/question/8189926

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