Exercise 9-14 Sheffield Company uses the gross profit method to estimate invento

Question

Exercise 9-14

Sheffield Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.

Purchase discounts

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

11,300

Inventory, May 1 $ 167,300 Purchases (gross) 580,800 Freight-in 32,100 Sales revenue 1,079,300 Sales returns 73,300

Purchase discounts

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

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.)

11,300

Explanation / Answer

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

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

Sales revenue 1079300 Less: Sales returns (73300) Net sales revenue 1006000 Less: gross profit (1006000*35%) (352100) Cost of goods sold 653900 Cost of goods available for sale Beginning inventory 167300 Purchase 580800 Less: purchase discounts (11300) Add: Freight 32100 768900 Ending inventory 115000

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