Question

Sarasota Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May. $148,700 Inventory, May 1 Purchases (gross) 678,400 30,500 Freight-in Sales revenue 1,095,000 Sales returns 70,300 Purchase discounts 11,800 Compute the estimated inventory at May 31, assuming that the gross profit is 25% of net sales. The estimated inventory at May 31 $ eTextbook and Media 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 O decimal places, e.g. 6,225.) $ The estimated inventory at May 31

Answer 1

Answer

• Requirement 1

Beginning Inventory		$148,700
Plus: Net Purchases		$666,600
Freight In		$30,500
Cost of Goods available for sale		$845,800
Less: Cost of Goods Sold
Net Sales	$1,024,700
Less: Estimated Gross Profits	$256,175
Estimated Cost of Goods Sold		$768,525
Estimated cost of inventory 31 May		$77,275 ANSWER

• Requirement 2

Beginning Inventory		$148,700
Plus: Net Purchases		$666,600
Freight In		$30,500
Cost of Goods available for sale		$845,800
Less: Cost of Goods Sold
Estimated Cost of Goods Sold	[$1024700 / 125%]	$819,760
Estimated cost of inventory 31 May		$26,040 Answer