Question

Blossom 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       $ 160,700
Purchases (gross)       595,100
Freight-in       28,600
Sales revenue       1,028,100
Sales returns       74,200
Purchase discounts       11,600

  
Compute the estimated inventory at May 31, assuming that the gross profit is 25% of net sales.

The estimated inventory at May 31      
$

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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      
$

Answer 1

1) Compute estimated inventory :

Beginning inventory		160700
Purchase	595100
Purchase discount	-11600
Freight in	28600
Cost of purchase		612100
Cost of goods sold
Net sales (1028100-74200)	953900
Less; Gross profit	-238475	-715425
Cost of ending inventory		57375

2) Compute estimated inventory :

Beginning inventory		160700
Purchase	595100
Purchase discount	-11600
Freight in	28600
Cost of purchase		612100
Cost of goods sold
Net sales (1028100-74200)	953900
Less; Gross profit (953900*25/125)	-190780	763120
Cost of ending inventory		9680