Question

Exercise 9-14

Nash 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

Compute the estimated inventory at May 31, assuming that the gross profit is 35% of net sales.

The estimated inventory at May 31
$

Compute the estimated inventory at May 31, assuming that the gross profit is 35% 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
$

Answer 1

Req 1
COST OF GOODS SOLD:
Total sales			998,400
Less: returns			-72100
Net sales revenue			926300
Less: Gross Profit @ 35%			324205
COST OF GOODS SOLD:			602095
Ending Inventory:
Beginning Inventory			156000
Add: Net purchases			564200
(576100-11900)
Add: Freight in			29300
Total Cost of goods available			749500
Less: Cost of Goods sold			602095
Ending Inventory:			147,405
Req 2:
COST OF GOODS SOLD:
Total sales			998,400
Less: returns			-72100
Net sales revenue			926300
Less: Gross Profit @ 35% on cost			240152	(926300/135*35)
COST OF GOODS SOLD:			686148
Ending Inventory:
Beginning Inventory			156000
Add: Net purchases			564200
(576100-11900)
Add: Freight in			29300
Total Cost of goods available			749500
Less: Cost of Goods sold			686148
Ending Inventory:			63,352