Four Step Calculation Process (These numbers will generally be given to you or you have instructions on where to find them) Step 1  Beginning Inventory, January 1  Plus net purchases for January 1 to January 31  Equals cost of merchandise available for sale Step 2  Net Sales for January 1 to January 31  Times previous year's gross profit percentage  Equals estimated gross profit on operations Step 3  Net sales for January 1 to January 31  Less estimated gross profit on operations  Equals estimated cost of merchandise sold Step 4  Cost of merchandise available for sale  Less estimated cost of merchandise sold  Equals estimated ending merchandise inventory
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