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Question - Grouper Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.
Inventory, May 1 $163,800
Purchases (gross) 651,200
Freight-in 29,500
Sales revenue 925,900
Sales returns 66,700
Purchase discounts 11,300
Required -
1. Compute the estimated inventory at May 31, assuming that the gross profit is 25% of net sales.
2. Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.
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