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In: Accounting

Flint Company Limited, which follows ASPE, uses the gross profit method to estimate inventory for monthly...

Flint Company Limited, which follows ASPE, uses the gross profit method to estimate inventory for monthly reports. Information follows for the month of May:

Inventory, May 1	$	364,000
Purchases		730,000
Freight–in		52,000
Sales		1,270,000
Sales returns		75,100
Purchase discounts		11,100

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

Estimated inventory, May 31

$

eTextbook and Media

Calculate the estimated inventory at May 31, assuming that the markup on cost is 25%.

Estimated inventory, May 31

$

Expert Solution

Answer- The estimated inventory at May 31 =$238725.

Explanation- Ending inventory of August = {(Opening inventory+ Net purchases+ Freight-in +Gross profit}-Net Sales

= {($364000 +$718900 +$52000)+ ($1194900*25%)}- $1194900

= ($1134900+$298725)- $1194900

= $238725

Where- Net Sales = Sales - Sales returns

= $1270000 - $75100

= $1194900

Net Purchases = Purchases-Purchases discounts

= $730000 - $11100

= $718900

Answer- The estimated inventory at May 31 =$178980.

Explanation- Ending inventory of August = {(Opening inventory+ Net purchases+ Freight-in +Gross profit}-Net Sales

= {($364000 +$718900 +$52000)+ ($1194900*20%)}- $1194900

= ($1134900+$238980)- $1194900

= $178980

Where- Net Sales = Sales - Sales returns

= $1270000 - $75100

= $1194900

Net Purchases = Purchases-Purchases discounts

= $730000 - $11100

= $718900

Gross profit of 25% of cost = 20% of sales

ekkarill92 answered 4 months ago

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