Question - Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.
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Inventory, May 1
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$ 172,600
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Purchases (gross)
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659,300
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Freight-in
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31,300
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Sales
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1,077,700
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Sales returns
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76,900
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Purchase discounts
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12,770
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(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.