Estimating ending inventory by the gross profit method and preparing the income statement [25-30 min]
Halloween Costumes estimates its inventory by the gross profit method. The gross profit has averaged 30% of net sales. The company’s inventory records reveal the following data:
Inventory, May 1 | $ 270,000 |
Transactions during May: | |
Purchases ........................ | 7,520,000 |
Purchase discounts ......... | 146,000 |
Purchase returns .............. | 37,000 |
Sales ................................ | 8,719,000 |
Sales returns .................... | 27,000 |
Requirements
1. Estimate the May 31 inventory, using the gross profit method.
2. Prepare the May income statement through gross profit for Halloween Costumes.
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