C) Average cost Problem 4 (8) Henderson Company uses the gross profit method to estimate ending inventory and cost of goods sold when preparing monthly financial statements required by its bank. Inventory on hand at the end of July was $122,500. The following information for the month of August was available from company records: Purchases $214,700 5,200 Freight-in Sales 341,000 Required: Show computations. profit ratio of 25%. a) Calculate the estimated inventory at the end of August, assuming a gross b) Prepare a multiple step Income Statement beginning with sales and ending with gross profit. Alternatively, you may compute ending inventory by preparing the Income Statement.