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gross profit method for Astaire Company

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(Gross Profit Method)

Astaire 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 $203,200
Purchases (gross) 812,800
Freight-in 38,100
Sales 1,270,000
Sales returns 88,900
Purchase discounts 15,240

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

Inventory $

(b) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.

Inventory $

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Solution Summary

The expert examines gross profit methods for Astaire Company.

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Education
  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
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