Question

Splish 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		$ 162,100
Purchases (gross)		691,300
Freight-in		30,800
Sales revenue		1,041,700
Sales returns		65,900
Purchase discounts		12,500

Compute the estimated inventory at May 31, assuming that the gross profit is 25% of net sales.

The estimated inventory at May 31

($enter the dollar amount of the estimated inventory at May 31)

  

Compute the estimated inventory at May 31, assuming that the gross profit is 25% 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

($enter the dollar amount of the estimated inventory at May 31)

Answer 1

	Inventory, May 1	$   162,100
	Purchases	$   691,300
	Freight-in	$     30,800
	Less: Purchases discounts	$    (12,500)
	Cost of goods available	$   871,700
	Sales revenue	$1,041,700
	Less: Sales return	$    (65,900)
	Net sales	$   975,800
1	Net sales	$   975,800
	Gross Profit (975800*25%)	$   243,950
	Cost of goods sold	$   731,850
	Cost of goods available	$   871,700
	The estimated inventory at May 31	$   139,850
2	Net sales	$   975,800
	Gross Profit (975800*25%/125%)	$   195,160
	Cost of goods sold	$   780,640
	Cost of goods available	$   871,700
	The estimated inventory at May 31	$     91,060