Estimating ending inventory by the gross profit method and preparing the income statement Kids Costumes estimates its inventory by the gross profit method. The gross profit has averaged 39% of net sales. The company’s inventory records reveal the following data:
|
Inventory, July 1 |
$ 268,000 |
|
Transactions during July: |
|
|
Purchases |
7,661,000 |
|
Purchase discounts |
171,000 |
|
Purchase returns |
32,000 |
|
Sales |
8,788,000 |
|
Sales returns |
35,000 |
Requirements
1. Estimate the July 31 inventory using the gross profit method.
2. Prepare the July income statement through gross profit for Kids Costumes.