In July 2011, the Accountant for LBJ Imports Is in the Process

Multiple Choice

In July 2011, the accountant for LBJ Imports is in the process of preparing financial statements for the quarter ended June 30, 2011. The physical inventory, however, was last taken on June 5 and the accountant must establish the approximate cost at June 30 from the following data: The gross profit on sales has consistently averaged 40% of sales. Using the gross profit method, compute the approximate inventory cost at June 30, 2011.

A) $420,000.
B) $880,000.
C) $480,000.
D) $1,360,000.