On December 31, a Company Needed to Estimate Its Ending

Multiple Choice

On December 31, a company needed to estimate its ending inventory to prepare its fourth quarter financial statements. The following information is currently available: Inventory as of October 1: $12,500
Net sales for fourth quarter: $40,000
Net purchases for fourth quarter: $27,500
The company typically achieves a gross profit ratio of 15%. Ending Inventory under the gross profit method would be:

A) $4,000
B) $6,000
C) $10,000
D) $16,000
E) $34,000