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# Exercise 9-14 (Part Level Submission) Sandhill Company uses the gross profit method to estimate inventory for...

Exercise 9-14 (Part Level Submission) Sandhill 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 Purchases (gross) Freight-in Sales revenue Sales returns Purchase discounts \$ 160,700 595,100 28,600 1,028,100 74,200 11,600 (a) Your answer is correct. Compute the estimated inventory at May 31, assuming that the gross profit is 25% of net sales. The estimated inventory at May 31 1 5 7375 SHOW SOLUTION SHOW ANSWER
(b) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost. (Round percentage of sales to 2 decimal places, e.g. 78.74% and final answer to O decimal places, e.g. 6,225.) The estimated inventory at May 31

 (a) Computation of estimated inventory at May, 31, assuming that the gross profit is 25% of net sales \$ \$ Inventory, May 1 160,700.00 Purchases (gross) 595,100.00 Purchase discounts (11,600.00) Freight-in 28,600.00 Goods Available for sale 772,800.00 Less: Sales (at selling price) 1,028,100.00 Sales returns (74,200.00) Net sales 953,900.00 Less gross profit (25% of \$953,900) 238,475.00 Sales (at cost) 715,425.00 Inventory, May 31 57,375.00 (b) Computation of estimated inventory at May, 31, assuming that the gross profit is 25% of cost \$ \$ Inventory, May 1 160,700.00 Purchases (gross) 595,100.00 Purchase discounts (11,600.00) Freight-in 28,600.00 Goods Available for sale 772,800.00 Less: Sales (at selling price) 1,028,100.00 Sales returns (74,200.00) Net sales 953,900.00 Less gross profit (953900*25/125) 190,780.00 Sales (at cost) 763,120.00 Inventory, May 31 9,680.00

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