Babyland wishes to produce quarterly financial statements, but it takes a physical count of inventory only at year end. The following historical data were taken from the 2013 and 2014 accounting records:
-1.png)
At the end of the first quarter of 2015, Babyland's ledger had the following account balances:
-2.png)
Based on purchases and sales, the Babyland accountant thinks inventory is low.
Required:
Using the information provided, estimate the following for the first quarter of 2015:
a. Cost of goods sold. (Use the average cost of goods sold percentage.)
b. Ending inventory at March 31.
c. What could explain the difference between actual and estimated inventory?