Exercise 9-14 Nash Company uses the gross profit method to estimate inventory fo

Question

Exercise 9-14

Nash 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 $ 156,000
Purchases (gross) 576,100
Freight-in 29,300
Sales revenue 998,400
Sales returns 72,100
Purchase discounts 11,900

Compute the estimated inventory at May 31, assuming that the gross profit is 35% of net sales.

The estimated inventory at May 31
$

Compute the estimated inventory at May 31, assuming that the gross profit is 35% 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

Req 1 COST OF GOODS SOLD: Total sales 998,400 Less: returns -72100 Net sales revenue 926300 Less: Gross Profit @ 35% 324205 COST OF GOODS SOLD: 602095 Ending Inventory: Beginning Inventory 156000 Add: Net purchases 564200 (576100-11900) Add: Freight in 29300 Total Cost of goods available 749500 Less: Cost of Goods sold 602095 Ending Inventory: 147,405 Req 2: COST OF GOODS SOLD: Total sales 998,400 Less: returns -72100 Net sales revenue 926300 Less: Gross Profit @ 35% on cost 240152 (926300/135*35) COST OF GOODS SOLD: 686148 Ending Inventory: Beginning Inventory 156000 Add: Net purchases 564200 (576100-11900) Add: Freight in 29300 Total Cost of goods available 749500 Less: Cost of Goods sold 686148 Ending Inventory: 63,352

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