On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements.The following information is available: Beginning inventory,January 1: $4,000
Net sales: $80,000
Net purchases: $78,000
The company's gross margin ratio is 25%.Using the gross profit method,the estimated ending inventory value would be:

A) $82,000.
B) $60,000.
C) $20,000.
D) $22,000.
E) $19,500.

First, we need to calculate the cost of goods sold (COGS):
Net purchases = $78,000
Beginning inventory = $4,000
Goods available for sale = $82,000

COGS = Goods available for sale - ending inventory
Since we need to find ending inventory, we can rearrange the equation as:
Ending inventory = Goods available for sale - COGS

To find COGS using the gross profit method, we need to first calculate the gross profit:
Net sales = $80,000
Gross margin ratio = 25%
Gross profit = Net sales x Gross margin ratio
Gross profit = $80,000 x 0.25 = $20,000

COGS = Net sales - Gross profit
COGS = $80,000 - $20,000 = $60,000

Therefore, the estimated ending inventory is:
Ending inventory = Goods available for sale - COGS
Ending inventory = $82,000 - $60,000 = $22,000

Option D is the correct answer.