Exercise 9-14 Oriole Company uses the gross profit method to estimate inventory
ID: 2580042 • Letter: E
Question
Exercise 9-14 Oriole 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 Purchases (gross) Freight-in Sales revenue Sales returns Purchase discounts 159,500 593,300 32,900 974,400 75,900 10,800 Compute the estimated inventory at May 31, assuming that the gross profit is 35% of net sales. The estimated inventory at May 31s LINK TO TEXT VIDEO: SIMILAR EXERCISE Compute the estimated inventory at May 31, assuming that the gross profit is 35% of cost. (Round percentage of sales to 2 decimal places, eg. 78.74% and final answer to 0 decimal places, eg. 6,225.) The estimated inventory at May 31 LINK TO TEXT VIDEO: SIMILAR EXERCISE Question Attempts: 0 of 3 used SAVE FOR LATER SUBMIT ANSWERExplanation / Answer
Answer:- 1)-Gross profit = 35% on sales
Gross profit = $898500*35% =$314475
Sales (Net)= Sales revenue-Sales returns
= $974400-$75900 =$898500
Gross profit = Sales + Closing inventory –Opening inventory+Purchses(Net)+Freight-in
$314475 = $898500+Closing inventory-$159500 +$582500+$32900
Closing inventory 31 May= $159500+$582500+$32900+$314475-$898500
=$190875
2)-Let cost of sales by =$100
Add profit 35% =$35
Sales =$135
Rate of profit on sales =$35/$135*100 = 25.93%
Gross profit =$898500*25.93% = $232981
$232981 = $898500+Closing inventory-$159500 +$582500+$32900
Closing inventory 31 May= $159500+$582500+$32900+$232981-$898500
=$109381
Where:-
Net Sales = Sales revenues- Sales returns
=$974400-$75900 = $898500
Net Purchases = Purchases(Gross)-Purchase discounts
=$593300-$10800 = $582500
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