The following information pertains to the Godfrey Company for the six months ended June 30 of the current year:

Merchandise inventory, January 1

$ 700,000

Purchases

5,000,000

Freight-in

400,000

Net sales

6,000,000

Gross profit is normally 25% of sales. What is the estimated amount of inventory on hand at June 30?

  1. $100,000.
  2. $1,600,000.
  3. $2,100,000.
  4. $4,600,000.