Calculate closing inventory from net purchases and COGS derived from mark-up Steps: - Net purchases = Purchases - Sales returns outwards = $95,000 -$2,000 = $93,000 - COGS = Sales revenue ÷ (1 + mark-up) =$120,000 ÷ 1.25 = $96,000 - Goods available for sale = Opening inventory + Net purchases =$18,000 + $93,000 =$111,000 - Closing inventory = Goods available for sale - COGS = $111,000 -$96,000 = $15,000 Why A is correct: - Matches the inventory formula where COGS is sales divided by 1 plus mark-up percentage (cost = 80$18,000 + $95,000 -$96,000 = $17,000, close but ignores adjustment). - C: Overestimates available goods by adding returns outwards instead of subtracting ($18,000 + $95,000 +$2,000 - $96,000 =$19,000, then slight miscalc). - D: Underestimates COGS by treating mark-up as on sales price rather than cost ($120,000 × 0.75 =$90,000 COGS, yielding $23,000, approx). Final answer: …