1. Estimating Inventories

2. Gross Profit Method Estimated Gross Profit = Net Sales x GPM
Net Sales – Estimate Gross Profit = COGS
Step 1.
Net Sales ,000
Less: Estimated GP (30% of 200k) ,000
Estimated COGS ,000
Step 2.
Beginning Inventory ,000
Purchases ,000
Goods Available for Sale 160,000
Less: Estimated COGS 140,000
Estimated Ending Inventory ,000

3. Retail Inventory Method
Goods Available for Sale at Retail
Net Sales
Ending Inventory at Retail = -
Goods Available for Sale at Cost
Goods Available for Sale at Retail
Cost to Retail Ratio =
Cost to Retail Ratio
Ending Inventory at Retail
Estimated Cost of Ending Inventory =

4. Retail Inventory Method Estimation
At Cost
At Retail
Beginning Inventory
$14,000
$21,500
Good Purchased
61,000
78,500
Good available for sale
75,000
100,000
Net Sales
70,000
(1) Ending Inventory at retail
30,000
(2) Cost to Retail Ratio = 75%
(3) Estimated cost of ending inventory (30,000 x 75%)
22,500