Mark Price Company uses the gross profit method to estimate inventory for monthl

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

Explanation / Answer

Net sales revenue = 1,000,000 - 70,000 = 930,000

a) Cost of goods sold = 930,000 (1-.30) = 651,000

Ending inventory = Beginning +Purchase -Freight in -Purchase discount -Cost of goods sold

           = 160000+ 640000+30000 -12000-651000

             = $ 167,000

b)Cost of goods sold = 930000 /1.30 = $ 715,384.62

Ending inventory = 160000+640000+ 30000- 12000- 715384.62

               = 102,615.38   [rounded to 102,615 ]

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