INTERMEDIATE ACCOUNTING I MESSAGE HY INSTRUCTOR STANDARD VIEWw PKINTER VER Exerc

Question

INTERMEDIATE ACCOUNTING I MESSAGE HY INSTRUCTOR STANDARD VIEWw PKINTER VER Exercise 9-14 (Part Level Submission) ita Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May ework Inventory, May 1 Purchases (gross) Freight-in Sales revenue Sales returns Purchase discounts $ 145,400 658,600 27,700 990,600 76,300 11,900 4 (Pa 0(Part sion) s by Your answer is correct. Compute the estimated inventory at May 31, assuming that the gross profit is 35% of net sales. The estimated inventory at May 31 Click if you would like to Show Work for this question: Open Show Work 31590 225505 sHow sOLUTION SHOW ANSWER Attempts: 2 of 2 used Compute the estimated inventory at May 31, assuming that the gross profit is 35% of cost. Round percentage of sales to 2 deci nal places, o g 78 74% and final an ver to o decin al places, eg 0,225 The estimated inventory at May 31 Click if you would like to Show Work for this question: Oren Shy Work SAVE FOR LATER SUB Attempts: o of 2 used

Explanation / Answer

Let cost of sales be x ,so gross profit = x*.35 = .35x

Gross profit =net sales -cost of sales

.35 x = [990600-76300]-x

.35 x = 914300-x

   x +.35x = 914300

      1.35x = 914300

          x = 914300 / 1.35 = 677259.26 (cost of sales)

net purchase = 658600-11900=646700

cost of sales = beginning inventory +net purchase+freight in -ending inventory

   677259.26 = 145400 + 646700+27700 -EI

   677259.26 = 819800-EI

Ending inventory = 819800 -677259.26

             = $ 142541 rounded

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