Question - Gross Profit Method
Astaire 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 $206,400
Purchases (gross) 825,600
Freight-in 38,700
Sales 1,290,000
Sales returns 90,300
Purchase discounts 15,480
(a) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales.
(b) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.