(L.OBJ. 7) Estimating ending inventory by the gross profit method and preparing the Inco...

(L.OBJ. 7) Estimating ending inventory by the gross profit method and preparing the Income statement [25—30 min]

Gala Costumes estimates its inventory by the gross profit method. The gross profit has averaged 28% of net sales. The company’s inventory records reveal the following data (amounts in thousands):

Requirements

1. Estimate the December 31 inventory, using the gross profit method.

2. Prepare the December income statement through gross profit for Gala Costumes.