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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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