Estimating ending inventory by the gross profit method and preparing the income statement [25-30 min]
Kids Costumes estimates its inventory by the gross profit method. The gross profit has averaged 39% of net sales. The company’s inventory records reveal the following data:
Inventory, July 1 | $ 268,000 |
Transactions during July: | |
Purchases........................ | 7,661,000 |
Purchase discounts.......... | 171,000 |
Purchase returns.............. | 32,000 |
Sales................................ | 8,788,000 |
Sales returns.................... | 35,000 |
Requirements
1. Estimate the July 31 inventory using the gross profit method.
2. Prepare the July income statement through gross profit for Kids Costumes.
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