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Sagot :
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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