Big Box Store has operated with a 30% average gross profit ratio for a number of years.It had $100,000 in sales during the second quarter of this year.If it began the quarter with $18,000 of inventory at cost and purchased $72,000 of inventory during the quarter,its estimated ending inventory by the gross profit method is:

A) $30,000.
B) $21,000.
C) $20,000.
D) $18,000.
E) $27,000.

Using the gross profit method, the cost of goods sold can be calculated as:

Cost of goods sold = Sales - (Beginning inventory + Purchases)

Cost of goods sold = $100,000 - ($18,000 + $72,000)
Cost of goods sold = $10,000

We know that the gross profit ratio is 30%, which means that the gross profit is 30% of the sales. Therefore, we can calculate the estimated gross profit as:

Gross profit = Gross profit ratio x Sales
Gross profit = 0.30 x $100,000
Gross profit = $30,000

Using the formula for gross profit:

Gross profit = Sales - Cost of goods sold

$30,000 = $100,000 - Cost of goods sold
Cost of goods sold = $70,000

Finally, we can calculate the estimated ending inventory using the formula:

Estimated ending inventory = Cost of goods available for sale - Cost of goods sold

Estimated ending inventory = ($18,000 + $72,000) - $70,000
Estimated ending inventory = $20,000

Therefore, the best choice is C, $20,000.