Marc Price Co. uses the gross profit method to estimateinventory for monthly reporting purposes. Presented below isinformation for themon of May.
Inventory, May1 160,000
Purchases(gross) 640,000
Freight-in 30,000
Sales 1,000,000
Salesreturns 70,000
Purchasediscounts 12,000
a. compute the estimated inventory at May 31, assuming thatthe gross profit is 30% of sales.
b. compute the estimated inventory at May 31, assuming thatthe gross profit is 30% of cost.