Question

Buffalo 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 $ 165,300 Purchases (gross) 619,800 Freight-in 30,100 Sales revenue 940,100 Sales returns 68,700 Purchase discounts 11,600

Compute the estimated inventory at May 31, assuming that the gross profit is 40% of net sales. The estimated inventory at May 31 $

Compute the estimated inventory at May 31, assuming that the gross profit is 40% 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 $

Answer 1

Case -2 Case -1 Particulars Amount Particulars Amount Amount Amount $ 165,300 Inventory May 1 Purchases gross Purchase discount Inventory May 1 Purchases gross $165,300 $619,800 $619,800 $11,600 $ 11,600 Purchase discount Net purchase Freight in Gross profit ( 871400*0.40) Sales Sales return Net purchase Freight in Gross profit (Computed below) Sales $608,200 $30,100 $ 348,560 $608,200 $ 30,100 $ 248,972 $940,100 $68,700 $940,100 $68,700 Sales return Net sales $(871,400) $ 280,760 $(871,400) $181,172 Net sales Inventory May 31 COGS Opening inventory Purchases Freight - Closing inventory Gross profit COGS * 40% Gross profit (Opening inventory Purchases + Freight Closing inventory) *40% Gross profit (165300 608200 +30100 closing inventory)*40 % Gross profit 321440 - closing inventory*40% Inventory May 31 Gross profit = Net Sales* 40% Gross profit = 871400 * 40 % = 348560 Please provide feedback with UP VOTE Closing inventory 165300 +608200 +30100 321440 closing inventory *40% - 871400 Closing inventory -181172 Gross profit = 321440 -181172 * 0.40 248972