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Splish Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below...

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Accounting

Splish Company uses the gross profit method to estimateinventory for monthly reporting purposes. Presented below isinformation for the month of May.

Inventory, May 1$ 162,100
Purchases (gross)691,300
Freight-in30,800
Sales revenue1,041,700
Sales returns65,900
Purchase discounts12,500

Compute the estimated inventory at May 31, assuming that thegross profit is 25% of net sales.

The estimated inventory at May 31

($enter the dollar amount of the estimated inventory at May31)

  

Compute the estimated inventory at May 31, assuming that thegross profit is 25% of cost. (Round percentage of salesto 2 decimal places, e.g. 78.74% and final answer to 0 decimalplaces, e.g. 6,225.)

The estimated inventory at May 31

($enter the dollar amount of the estimated inventory at May31)

Answer & Explanation Solved by verified expert
4.4 Ratings (927 Votes)

Inventory, May 1 $   162,100
Purchases $   691,300
Freight-in $     30,800
Less: Purchases discounts $    (12,500)
Cost of goods available $   871,700
Sales revenue $1,041,700
Less: Sales return $    (65,900)
Net sales $   975,800
1 Net sales $   975,800
Gross Profit (975800*25%) $   243,950
Cost of goods sold $   731,850
Cost of goods available $   871,700
The estimated inventory at May 31 $   139,850
2 Net sales $   975,800
Gross Profit (975800*25%/125%) $   195,160
Cost of goods sold $   780,640
Cost of goods available $   871,700
The estimated inventory at May 31 $     91,060

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