Estimating ending inventory by the gross profit method and preparing the income statement
Kids Costumes estimates its inventory by the gross profit method. The gross profit has averaged 39% of net sales. The company's inventory records reveal the following data:
|
Inventory, July 1
|
$ 268,000
|
|
Transactions during July:
|
|
|
Purchases
|
7,661,000
|
|
Purchase discounts
|
171,000
|
|
Purchase returns
|
32,000
|
|
Sales
|
8,788,000
|
|
Sales returns
|
35,000
|
Requirements
1. Estimate the July 31 inventory using the gross profit method.
2. Prepare the July income statement through gross profit for Kids Costumes.