Gross profit method Kiowa Ltd. prepares monthly financial statements. Inventory is counted only at year end;...

Gross profit method

Kiowa Ltd. prepares monthly financial statements. Inventory is counted only at year end; thus, month-end inventories must be estimated. All sales are made on account. The rate of markup on cost is 25%. The following information relates to the month of May:

Accounts receivable, May 1 $31,000

Accounts receivable, May 31 $37,000

Collections of accounts during May $94,000

Inventory, May 1 $47,000

Purchases during May $75,000

Instructions

Calculate the estimated cost of the inventory on May 31.

Solutions

Expert Solution

Calculation of Sales during May
	$
Collections of accounts	94,000.00
Add: accounts receivable, May 31	37,000.00
Less: accounts receivable, May 1	(31,000.00)
Sales during May	100,000.00



Calculation of estimated inventory at March 31

	$
Beginning inventory	47,000.00
Purchases during May	75,000.00
Goods Available	122,000.00
Cost of sales ($100,000 ÷ 125%)	(80,000.00)
Estimated ending inventory, May 31	42,000.00

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Ogonquit Enterprises prepares annual financial statements and adjusts its accounts only at the end of the...

Ogonquit Enterprises prepares annual financial statements and adjusts its accounts only at the end of the year. The following information is available for the year ended December 31, 2016: a. Ogonquit purchased office furniture last year for $25,000. The furniture has an estimated useful life of seven years and an estimated salvage value of $4,000. b. The Supplies account had a balance of $1,200 on January 1, 2016. During 2016, Ogonquit added $12,900 to the account for purchases of supplies...

X Company prepares monthly financial statements. In January, it purchased inventory on account. The accountant recorded...

X Company prepares monthly financial statements. In January, it purchased inventory on account. The accountant recorded the transaction as an increase in Inventories and an increase in Retained Earnings. As a result, which of the following is true regarding the January financial statements? Retained Earnings was understated. Expenses were understated. Accounts Payable was understated. Inventories were understated. Accounts Receivable was overstated. Revenue was understated.

Whispering Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below...

Whispering 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 $ 171,100 Purchases (gross) 686,700 Freight-in 28,700 Sales revenue 1,067,400 Sales returns 63,300 Purchase discounts 11,300 Compute the estimated inventory at May 31, assuming that the gross profit is 30% of net sales. The estimated inventory at May 31is ______ Compute the estimated inventory at May 31, assuming that the gross profit is 30%...

Ayayai Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below...

Ayayai 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 $ 156,000 Purchases (gross) 576,100 Freight-in 29,300 Sales revenue 998,400 Sales returns 72,100 Purchase discounts 11,900 (a) Your answer is incorrect. Try again. 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...

Crane Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below...

Crane 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 $ 171,200 Purchases (gross) 596,600 Freight-in 28,400 Sales revenue 957,000 Sales returns 64,700 Purchase discounts 12,300 Compute the estimated inventory at May 31, assuming that the gross profit is 25% of net sales. The estimated inventory at May 31

Pharoah Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below...

Pharoah 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 $ 156,500 Purchases (gross) 628,400 Freight-in 31,900 Sales revenue 1,029,400 Sales returns 74,600 Purchase discounts 10,800 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 eTextbook and Media Compute...

Exercise 9-14 Crane Company uses the gross profit method to estimate inventory for monthly reporting...

Exercise 9-14 Crane 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 $ 162,000 Purchases (gross) 637,500 Freight-in 28,600 Sales revenue 1,031,100 Sales returns 69,600 Purchase discounts 11,500 Incorrect answer. Your answer is incorrect. Try again. Compute the estimated inventory at May 31, assuming that the gross profit is 20% of net sales. The estimated...

Martinez Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below...

Martinez 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 $ 175,600 Purchases (gross) 617,400 Freight-in 31,700 Sales revenue 973,200 Sales returns 68,100 Purchase discounts 12,900 Part 1 Correct answer iconYour answer is correct. Compute the estimated inventory at May 31, assuming that the gross profit is 20% of net sales. The estimated inventory at May 31 $enter the dollar amount of the estimated...

Novak Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below...

Novak 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$ 163,800 Purchases (gross) 651,200 Freight-in 29,500 Sales revenue 925,900 Sales returns 66,700 Purchase discounts 11,300 Compute the estimated inventory at May 31, assuming that the gross profit is 25% of net sales. Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost

Splish Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below...

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...

Subjects