Sweeney Stores estimates its inventory by the gross margin method when preparing monthly financial statements (Sweeney Stores uses the periodic method otherwise). For the past two years, gross margin has averaged 40 percent of net sales. The business's inventory records for its stores reveal the following data:
Inventory: July 1, 2014 ............................ $ 240,000
Transactions during July:
Purchases ............................................ 7,890,000
Purchases returns ................................... 230,000
Sales .................................................. 11,250,000
Sales returns ......................................... 125,000
Required
1. Estimate the July 31, 2014, inventory using the gross margin method.
2. Prepare the July 2014 income statement through gross margin for Sweeney Stores.