Respuesta :
Answer:
Terry's Closing Inventory is $131,360.
Terry's Gross profit is $431,360.
We follow these steps to arrive at the answers:
1. Calculate the base value of closing inventory (CI):
[tex]CI_{base value} = \frac{CI*Index at base year}{current price index}[/tex]
[tex]CI_{base value} = \frac{143360*100}{112} = 128,000[/tex]
2. Calculate additions to inventory at base price
[tex]Additions to inventory = CI_{base value} - Beginning inventory[/tex]
[tex]Additions to inventory = 128000 - 100000 = 28,000[/tex]
3. Calculate the value of additions to inventory at current prices
[tex]Additions to inventory_{current Value} = Additions to inventory_{base Value} * \frac{current price index}{base price index}[/tex]
[tex]Additions to inventory_{current Value} = 28,000 * \frac{112}{100} = 31,360[/tex]
4. Calculate the value of Closing inventory
[tex]Closing inventory = Beginning Inventory + Additions to inventory_{current Value}[/tex]
[tex]Closing inventory = 100,000 + 31,360 = 131,360[/tex]
5. Compute Cost of Goods Sold (COGS):
[tex]COGS = Opening Inventory + Purchases - Closing Inventory[/tex]
[tex]COGS = (100000 + 600000 - 131360) = 568640[/tex]
6. Compute Gross profit
[tex]Gross profit = Sales - COGS[/tex]
[tex]Gross profit = 1000000 - 568640 = 431360[/tex]
