Toyland wishes to produce quarterly financial statements, but it takes a physical count of inventory only at year-end. The following historical data were taken from the Year 1 and Year 2 accounting records:

At the end of the first quarter of Year 3, Toyland’s ledger had the following account balances:

Based on purchases and sales, the Toyland accountant thinks inventory is low.

Required
Using the information provided, estimate the following for the first quarter of Year 3:
a. Cost of goods sold.
b. Ending inventory at March 31.
c. What could explain the difference between actual and estimated inventory?

Transcribed Image Text:

Year 1 Year 2 Net sales Cost of goods sold $150,000 $190,000 89,200 76,000 Sales Purchases $210,000 90,000 Beginning inventory 1/1/Year 3 Ending inventory 3/31/Year 3 32,100 16,000