Bonita Company uses the gross profit method to estimate inve

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 $ 170,600 Purchases (gross) 689,500 Freight-in 29,300 Sales revenue 975,600 Sales returns 75,600 Purchase discounts 11,000

Solution

$ Sales revenue          975,600.00 Less: Sales return           (75,600.00) Net sales          900,000.00 Inventory ,may 1          170,600.00 Purchases (gross)          689,500.00 Purchase discounts           (11,000.00) Freight-in             29,300.00 Cost of goods available for sale          878,400.00 1 Gross profit ( $ 900,000 x 30% )          270,000.00 Cost of goods sold ( net sales minus gross profit )          630,000.00 The estimated inventory at May 31 ( $ 878,400 - $ 630,000 )          248,400.00 2 Gross profit ( 30% on cost) - { net sales x (0.3/1.30)}          207,692.31 Cost of goods sold ( net sales minus gross profit )          692,307.69 The estimated inventory at May 31 ( $ 878,400 - $ 692,307.69 )          186,092.31