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19 days ago
12

Kesler, Inc. estimates the cost of its physical inventory at March 31 for use in an interim financial statement. The rate of mar

kup on cost is 25%. The following account balances are available: Inventory, March 1 $440,000 Purchases 344,000 Purchase returns 16,000 Sales during March 600,000 The estimate of the cost of inventory at March 31 would be:
Business
1 answer:
marusya05 [3K]19 days ago
6 0

Answer:

$288,000

Explanation:

Provided data includes:

Cost markup rate = 25%

Available inventory account balance =  $440,000

Purchases total $344,000

Returned purchases amount to $16,000

Thus, Net purchase = total purchases - purchase returns

= $344,000 - $16,000 = $328,000

Sales executed during March total $600,000

Accordingly,

cost of products = 600,000 / 1.25 = $480,000

Therefore,

inventory cost = Available account balance + Net purchases - cost of sold products

or

inventory cost =  $440,000 + $328,000 - $480,000 = $288,000

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