Martinez Corporation’s retail store and warehouse closed for an entire weekend while the year-end inventory was counted. When the count was finished, the controller gathered all the count books and information from the clerical staff, completed the ending inventory calculations, and prepared the following partial income statement for the general manager for Monday morning:Sales $2,752,000 Beginning inventory $641,000 Purchases 1,550,000 Total goods available for sale 2,191,000 Less ending inventory 641,000 Cost of goods sold 1,550,000 Gross profit $1,202,000 The general manager called the controller into her office after quickly reviewing the preliminary statements. “You’ve made an error in the inventory,” she stated. “My pricing all year has been carefully controlled to provide a gross profit of 35%, and I know the sales are correct.”(a)How much should the ending inventory have been?Expected ending inventory = ?

Gross profit = Sales * 35% = $2,752,000 x 35% = $963,200

Answered: Martinez Corporation’s retail store and…

Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter7: Inventories

Section: Chapter Questions

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Martinez Corporation’s retail store and warehouse closed for an entire weekend while the year-end inventory was counted. When the count was finished, the controller gathered all the count books and information from the clerical staff, completed the ending inventory calculations, and prepared the following partial income statement for the general manager for Monday morning:

Sales			$	2,752,000
Beginning inventory	$	641,000
Purchases		1,550,000
Total goods available for sale		2,191,000
Less ending inventory		641,000
Cost of goods sold				1,550,000
Gross profit			$	1,202,000

The general manager called the controller into her office after quickly reviewing the preliminary statements. “You’ve made an error in the inventory,” she stated. “My pricing all year has been carefully controlled to provide a gross profit of 35%, and I know the sales are correct.”

(a)

How much should the ending inventory have been?

Expected ending inventory = ?

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