Share
Explore BrainMass

Mark Price Company uses the gross profit method to estimate

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.

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.

$2.19