Question

calculated the estimated inventory at May 31, assuming that the markup on cost is 25%

Bridgeport Company Limited, which follows ASPE, uses the gross profit method to estimate inventory for monthly reports. Information follows for the month of May: $ 367,000 726,000 52.000 Inventory, May 1 Purchases Freight-in Sales Sales returns Purchase discounts 1.270,000 75,800 12,300

Answer 1

Solution:

Cost of goods available for sale = Beginning inventory + Purchases + Freight In - Purchase discounts

= $367,000 + $726,000 + $52,000 - $12,300

= $1,132,700

Cost of goods sold = Net sales - Gross profit

= ($1,270,000 - $75,800) - ($1,194,200 * 25/125) = $955,360

Ending inventory = Cost of goods available for sale - Cost of goods sold = $1,132,700 - $955,360 = $177,340