Question

Mark Price 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 $ 164,700

Purchases (gross) 651,400

Freight-in 31,400

Sales revenue 1,064,600

Sales returns 82,400

Purchase discounts 13,020

Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales

Answer 1

Answer-

Cost of Inventory on May 01		$164,700
Net Purchases		$638,380
Freight in		$31,400
Cost of Goods available for sale		$834,480
Less : Estimated Cost of Goods sold
Net Sales	$982,200
Less: Estimated Gross Profit (@30% of Net sales)	$294,660	$687,540
Estimated Cost of Inventory on May 31		$146,940

Note :

Net Purchases = Purchase (Gross) – Purchase discounts = 651,400 – 13,020 = $ 638,380

Net Sales = Sales Revenue – Sales returns = 1,064,600 – 82,400 = $ 982,200