On January 1, 2014, the merchandise inventory of Glaus, Inc. was $1,200,000. During 2014 Glaus purchased $2,400,000 of merchandise and recorded sales of $3,000,000. The gross profit rate on these sales was 25%. What is the merchandise inventory of Glaus at December 31, 2014? a. $600,000. b. $750,000. c. $1,350,000. d. $2,250,000.

Question

Samantha Ferguson

Business

18 July, 02:16

On January 1, 2014, the merchandise inventory of Glaus, Inc. was $1,200,000. During 2014 Glaus purchased $2,400,000 of merchandise and recorded sales of $3,000,000. The gross profit rate on these sales was 25%. What is the merchandise inventory of Glaus at December 31, 2014? a. $600,000. b. $750,000. c. $1,350,000. d. $2,250,000.

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Answers (1)

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Isis Kidd · Answer 1

Answer: Option (C) is correct.

Explanation:

Given that,

Merchandise inventory (beginning inventory) = $1,200,000

Merchandise purchased = $2,400,000

Sales = $3,000,000

Gross profit rate on sales = 25%

Ending inventory of Glaus:

= Beginning inventory + Purchases - cost of goods sold

= $1,200,000 + $2,400,000 - [sales * (100-25) %]

= $1,200,000 + $2,400,000 - $3,000,000 * 0.75

= $1,200,000 + $2,400,000 - $2,250,000

= $1,350,000