Presented below is information related to Joey Harrington Corporation for the current year.

Instructions
(a) Compute the ending inventory, assuming that
(1) Gross profit is 45% of sales;
(2) Gross profit is 60% of cost;
(3) Gross profit is 35% of sales; and
(4) Gross profit is 25% of cost.
(b) Harrington would like to use the gross profit method to value its inventories for financial reporting purposes.
Prepare a brief memorandum to Harrington explaining why use of the gross profit method would not be permitted for financialreporting.

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$ 600,000 1,500,000 Beginning inventory Purchases Total goods available for sale Sales $2,100,000 2,500,000