Farr Lid prepares monthly financial statements and uses the gross profit method to estimate ending inventories . Historically , the company has had a 40% gross profit rate . During June , net sales amounted to $40 000 ; the beginning inventory on June 1 was $12 000 ; and the cost of goods purchased during June amounted to $ 18 000 . The estimated co stimated cost of Farr Lid's inventory on June 30 is : 1 56000 b ) $24 , 000 $ 10 000 $16000