Over the last two years, Allison Company has averaged 35 percent gross profit. At the end of

Question:

Over the last two years, Allison Company has averaged 35 percent gross profit. At the end of 20X1, the auditor found the following data in the records of the company:

Inquiry by the auditor revealed that employees of Allison Company had estimated the inventory on December 31, 20X1, instead of taking a complete physical count.


INSTRUCTIONS
Using the gross profit method of inventory estimation, verify the reasonableness (or lack of reasonableness) of the inventory estimate made by the company’s employees.
Analyze: If a physical inventory count on December 31, 20X1, revealed an ending inventory of $130,000, calculate the gross profit percentage.

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College Accounting Chapters 1-30

ISBN: 9781260247909

16th Edition

Authors: David Haddock, John Price, Michael Farina

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