Question

Question 8 0.5/1 View Policies Show Attempt History Current Attempt in Progress Bonita 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 $ 156,000 663,700 31,500 1,061,800 72,100 13,100 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 $ 95,825 e Textbook and Media

Answer 1

Inventory, May 1 = $156,000

Purchases = $663,700

Freight in = $31,500

Sales revenue = $1,061,800

Sales returns = $72,100

Purchase discounts = $13,100

Inventory, May 31 = ?

Net sales = Sales revenue - Sales returns

= $1,061,800 - $72,100

= $989,700

Gross profit = 25% of cost

Let the cost be $Y

Gross profit = Y x 25%

= 0.25Y

Net sales = Cost of goods sold + Gross profit

989,700 =  Y + 0.25Y

1.25Y = 989,700

Y = 791,760

Hence, Cost of goods sold = $791,760

Cost of goods sold = Inventory, May 1 + Purchases - Purchase discounts + Freight in - Inventory, May 31

791,760 = 156,000 + 663,700 - 13,100 + 31,500 -  Inventory, May 31

Inventory, May 31 = $46,340

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