Over the past several years, Sullivan Electronics Company has had an average gross profit of 30 percent. At the end of 2016, the income statement of the company included the following information:

Investigation revealed that employees of the company had not taken an actual physical count of the inventory on December 31. Instead, they had merely estimated the inventory.

INSTRUCTIONS
Using the gross profit method of inventory estimation, verify the reasonableness (or lack of reasonableness) of the ending inventory shown on the income statement.
Analyze:
If a physical inventory count on December 31, 2016, revealed an ending inventory of $145,563, calculate the gross profit percentage to the nearest one-tenth of 1 percent.

Transcribed Image Text:

Sales Cost of Goods 1,759,000 Inventory, January 1,2016 Purchases otal Merchandise Available for Sale 342000 Less Inventory,December 31, 2016 46,875 Cost of Goods Sod 122,000 ,220,000 1,195,125 563875 Gross Profit on Sales