Question

# lint Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below...

lint Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.

 Inventory, May 1 \$ 171,100 Purchases (gross) 686,700 Freight-in 28,700 Sales revenue 1,067,400 Sales returns 63,300 Purchase discounts 11,300
Compute the estimated inventory at May 31, assuming that the gross profit is 25% of net sales.
 The estimated inventory at May 31 \$enter the dollar amount of the estimated inventory at May 31
Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost. (Round percentage of sales to 2 decimal places, e.g. 78.74% and final answer to 0 decimal places, e.g. 6,225.)
 The estimated inventory at May 31 \$enter the dollar amount of the estimated inventory at May 31
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Option 1

 Computation of estimated ending inventory Opening Stock 171100 Net Purchases (686700-11300) 675400 Freight in 63300 Gross Profit (1004100*25%) 251025 Total 1160825 Less: Net sales (1067400-63300) 1004100 Inventory at the end 156725

Option 2

 Computation of estimated ending inventory Opening Stock 171100 Net Purchases (686700-11300) 675400 Freight in 63300 Gross Profit (1004100*25/125) 200820 Total 1110620 Less: Net sales (1067400-63300) 1004100 Inventory at the end 106520

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