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

Solutions

Expert Solution

The estimated inventory at May 31 = $114,675

Explanation

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

	$	$
Inventory, May 1		171,200.00
Purchases (gross)		596,600.00
Purchase discounts		(12,300.00)
Freight-in		28,400.00
Goods Available for sale		783,900.00
Less:
Sales	957,000.00
Sales returns	(64,700.00)
Net sales	892,300.00
Less gross profit (25% of $892,300)	223,075.00
Sales (at cost)		669,225.00
Inventory, May 31		114,675.00

ekkarill92 answered 1 year ago

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