On December 31, a company needed to estimate its ending inventory to prepare its annual financial statements.

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Question:

On December 31, a company needed to estimate its ending inventory to prepare its annual financial statements. The following information is currently available:

Inventory as of January 1: $120,500
Net sales for the year: $400,000
Net purchases for the year: $270,500

This company typically achieves a gross profit ratio of 15%. Ending Inventory under the gross profit method would be:

A. $102,425.

B. $10,425.

C. $9,000.

D. $51,000.

E. $51,425.