Over the past several years, Hyman Electronics has had an average gross profit of 30 percent. At the end of 2019, the income statement of the company included the following information:

Investigation revealed that employees of the company had not taken an actual physical count of the inventory on December 31. Instead, they had merely estimated the inventory.

INSTRUCTIONS

Using the gross profit method of inventory estimation, verify the reasonableness (or lack of reasonableness) of the ending inventory shown on the income statement.

Analyze: If a physical inventory count on December 31, 2019, revealed an ending inventory of $291,126, calculate the gross profit percentage to the nearest one-tenth of 1 percent.

Transcribed Image Text:

Sales Cost of Goods Inventory, January 1, 2019 Purchases Total Merchandise Avallable for Sale Less Inventory, December 31, 2019 Cost of Goods Sold Gross Profit on Sales $3,518,000 2,440,000 2,684,000 293,750 2,390,250 $1,127,750