Question

calculate the estimated inventory at May 31st, assuming that the gross profit is 25% of sales

Bridgeport Company Limited, which follows ASPE, uses the gross profit method to estimate inventory for monthly reports. Information follows for the month of May: Inventory, May 1 Purchases Freight-in Sales Sales returns Purchase discounts $ 367,000 726,000 52,000 1.270,000 75,800 12,300

Answer 1

Step 1: Calculation of Cost of Goods Available for Sale: 367,000.00 Inventory, May 1 Purchases Less: Purchase discounts Add: Freight In 726,000.00 (12,300.00) 52,000.00 $ $ 765,700.00 Cost of Goods Available for Sale $ 1,132,700.00 Step 2: Calculation of Cost of Goods Sold: 02 2 4 Sales Less: Sales Returns Net Sales Less: Gross Profit Margin ($1194200 x 25%) $ Cost of Goods Sold 1,270,000.00 (75,800.00) 1,194,200.00 (298,550.00) 895,650.00 Step 3: Calculation of Estimated Inventory to be reported: = Cost of Goods Available for Sale - Cost of Goods Sold = $1,132,700 - $895,650 = $237,050.00 Estimated Inventory to be reported = $237,050.