Question

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

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

 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

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