Mark Price 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 $160,000
Purchases (gross) $640,000
Freight in $30,000
Sales revenue 1,000,000
Sales returns $70,000
Purchase discounts 12,000
a) compute the estimated inventory at May 31, assuming the gross profit is 30% of sales.
b) copmute the estimated inventory at May 31, assuming that th egross prifit is 30% of cost.