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Astaire 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 $ 160,000Purchases (gross) 640,000Freight-in30,000Sales 1,000,000Sales returns 70,000Purchase discounts 12,000
Problem (a) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales.
Problem (b) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.
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