Estimating ending inventory by the gross profit method and preparing the income statement
Halloween Costumes estimates its inventory by the gross profit method. The gross profit has averaged 30% of net sales. The company's inventory records reveal the following data:
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Inventory, May 1
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$ 270,000
|
|
Transactions during May:
|
|
|
Purchases
|
7,520,000
|
|
Purchase discounts
|
146,000
|
|
Purchase returns
|
37,000
|
|
Sales
|
8,719,000
|
|
Sales returns
|
27,000
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Requirements
1. Estimate the May 31 inventory, using the gross profit method.
2. Prepare the May income statement through gross profit for Halloween Costumes.