When preparing its quarterly financial statements, Pace Co. uses the gross margin method to estimate ending inventory. The following information is available for the 1st quarter of 2016:

Beginning inventory $ 110,000

Purchases $ 385,000

Sales $ 525,000

Estimated gross margin percentage 45%

What was Pace's estimated inventory on March 31, 2016?

a. $236,250

b. $288,750

c. $206,250

d. $258,750