On July 1, the total inventory for Save-Mor Merchandisers was $614,100. Net purchases during the month were $313,900 and sales amounted to $611,400. Gross margin on sales was 69%.

Estimate the cost value of the inventory as of July 31 using the gross profit method (in $).

$

To estimate the cost value of the inventory as of July 31 using the gross profit method, we will proceed step-by-step:

### Step 1: Calculate the cost of goods sold (COGS).
Since the gross margin on sales is 69%, this means the cost of goods sold (COGS) is the remaining percentage of the sales (100% - 69% = 31%).

\[
\text{COGS} = \text{Sales} \times (1 - \text{Gross Margin})
\]
\[
\text{COGS} = 611,400 \times 0.31 = 189,534
\]

### Step 2: Calculate the total goods available for sale.
This is the sum of the beginning inventory (July 1) and the net purchases made during the month.

\[
\text{Goods available for sale} = \text{Beginning inventory} + \text{Net purchases}
\]
\[
\text{Goods available for sale} = 614,100 + 313,900 = 928,000
\]

### Step 3: Estimate the ending inventory.
The ending inventory is calculated by subtracting the cost of goods sold from the total goods available for sale.

\[
\text{Ending inventory} = \text{Goods available for sale} - \text{COGS}
\]
\[
\text{Ending inventory} = 928,000 - 189,534 = 738,466
\]

Thus, the estimated cost value of the inventory as of July 31 is **$738,466**.

Would you like further details or have any questions? Here are some related questions:

1. What is the importance of using the gross profit method for inventory estimation?
2. How does the gross margin percentage affect the cost of goods sold?
3. Can the gross profit method be used for periodic or perpetual inventory systems?
4. What are some limitations of the gross profit method?
5. How can you verify the accuracy of estimated inventory values?

**Tip:** Always ensure that the gross margin is accurate, as any errors will directly impact the COGS and the estimated inventory.

On July 1, the total inventory for Save-Mor Merchandisers was $614,100. Net purchases during the month were $313,900 and sales amounted to $611,400. Gross margin on sales was 69%. Estimate the cost value of the inventory as of July 31 using the gross profit method (in $).

Learn how to estimate the cost value of inventory for Save-Mor Merchandisers as of July 31 using the gross profit method. The problem involves key accounting concepts, including cost of goods sold (COGS), gross margin, and goods available for sale. Suitable for students in Grades 10-12 and college-level accounting.

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