Mark Price Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below
Question:
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
1. Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales.
2. Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost.
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1118147290
15th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield