Question

Exercise 9-14 Vaughn 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 $ 167,300 Purchases (gross) 580,800 Freight-in 32,100 Sales revenue 979,300 Sales returns 73,300 Purchase discounts 11,300 Compute the estimated inventory at May 31, assuming that the gross profit is 25% of net sales. The estimated inventory at May 31 $enter the dollar amount of the estimated inventory at May 31 LINK TO TEXT LINK TO VIDEO Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost. (Round percentage of sales to 2 decimal places, e.g. 78.74% and final answer to 0 decimal places, e.g. 6,225.) The estimated inventory at May 31 $enter the dollar amount of the estimated inventory at May 31

Answer 1

Assuming gross Profit 25% of net sales The estimated inventory at May 31 S 89,400 Assuming gross Profit 25% of Cost The estimated inventory at May 31 $ 44,100 Working Notes: cost of goods available for sale = Beginning inventory + Purchases-Purchase discounts Freight-in $167,300 +S580,800-$11,300+S32,100 = $768900 Net Sales Sales Revenue Sales returns - $979,300-S73,300 $906,000 Assuming gross Profit 25% of net sales Gross Profit S906,000*25% = S226,500 Cost of Goods sold Net sales Gross Profit $906,000-$226,500 $679,500 Cost of Goods sold= cost of goods available for sale - ending Inventory $679,500 $768,900 Ending Inventory Ending Inventory $768,900-$679,500 S89,400

Assuming gross Profit 25% of Cost Gross Profit $906,000*25/125 = S181,200 Cost of Goods sold= Net sales - Gross Profit $906,000-S181,200 $724,800 Cost of Goods sold = cost of goods available for sale - ending Inventory $724,800 = $768,900 - Ending Inventory Ending Inventory $768,900-S724,800 $44,100