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.