Exercise 9-12 Mark Price Company uses the gross profit method to estimate invent

Question

Exercise 9-12 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 $ 178,800 Purchases (gross) 650,500 Freight-in 30,400 Sales revenue 1,073,200 Sales returns 78,100 Purchase discounts 12,530 (a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales. The estimated inventory at May 31 $ (b) 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

Calculation of the estimated Inventory Gross Profit = 30% on Sales Sales 1073200 Less: Sales Return -78100 Net Sales 995100 Profit 30%*995100 298530 Purchases 650500 Freight In 30400 Total 680900 Ending Inventory Opening 178800 Purchases 680900 Gross Profit 298530 Less: Sales -995100 Inventory 163130

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