Question

Exercise 9-14 (Part Level Submission) Sandhill 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 Purchases (gross) Freight-in Sales revenue Sales returns Purchase discounts $ 160,700 595,100 28,600 1,028,100 74,200 11,600 (a) Your answer is correct. Compute the estimated inventory at May 31, assuming that the gross profit is 25% of net sales. The estimated inventory at May 31 1 5 7375 SHOW SOLUTION SHOW ANSWER

Answer 1

(a) Computation of estimated inventory at May, 31,
assuming that the gross profit is 25% of net sales
	$	$
Inventory, May 1		160,700.00
Purchases (gross)		595,100.00
Purchase discounts		(11,600.00)
Freight-in		28,600.00
Goods Available for sale		772,800.00
Less:
Sales (at selling price)	1,028,100.00
Sales returns	(74,200.00)
Net sales	953,900.00
Less gross profit (25% of $953,900)	238,475.00
Sales (at cost)		715,425.00
Inventory, May 31		57,375.00
(b) Computation of estimated inventory at May, 31,
assuming that the gross profit is 25% of cost
	$	$
Inventory, May 1		160,700.00
Purchases (gross)		595,100.00
Purchase discounts		(11,600.00)
Freight-in		28,600.00
Goods Available for sale		772,800.00
Less:
Sales (at selling price)	1,028,100.00
Sales returns	(74,200.00)
Net sales	953,900.00
Less gross profit (953900*25/125)	190,780.00
Sales (at cost)		763,120.00
Inventory, May 31		9,680.00