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# Mark Price Company uses the gross profit method to estimate

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Mark Price 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 \$ 160,000
Purchases (gross) 640,000
Freight-in 30,000
Sales 1,000,000
Sales returns 70,000
Purchase discounts 12,000

Instructions

(a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales.
(b) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost.

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#### Solution Preview

a) SALES \$ 930,000
Less: COGS
Beginning Inventory \$ 160,000
Purchases (net) \$ 628,000
Freight In \$ 30,000
COG Available \$ 818,000
Less: ...

#### Solution Summary

Mark Price 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 \$ 160,000
Purchases (gross) 640,000
Freight-in 30,000
Sales 1,000,000
Sales returns 70,000
Purchase discounts 12,000

Instructions

(a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales.
(b) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost.

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