Estimating ending inventory by the gross profit method and preparing the income statement
Halloween Costumes estimates its inventory by the gross profit method. The gross profit has averaged 30% of net sales. The company’s inventory records reveal the following data:
|
Inventory, May 1 |
$ 270,000 |
|
Transactions during May: |
|
|
Purchases |
7,520,000 |
|
Purchase discounts |
146,000 |
|
Purchase returns |
37,000 |
|
Sales |
8,719,000 |
|
Sales returns |
27,000 |
Requirements
1. Estimate the May 31 inventory, using the gross profit method.
2. Prepare the May income statement through gross profit for Halloween Costumes.