Interim Inventory Computation—Gross Profit Method
The following information was taken from the records of Prairie Company.
|
Jan. 1, 2007–Dec. 31, 2007 |
Jan. 1, 2008–Sept. 30, 2008 |
|
|
Sales |
$2,500,000 |
$1,500,000 |
|
Beginning inventory |
420,000 |
785,000 |
|
Purchases |
2,152,000 |
1,061,000 |
|
Freight in |
116,000 |
72,000 |
|
Purchase discounts |
30,000 |
15,000 |
|
Purchase returns |
40,000 |
13,000 |
|
Purchase allowances |
8,000 |
5,000 |
|
Ending inventory |
785,000 |
? |
|
Selling and general expenses |
450,000 |
320,000 |
Instructions: Using the gross profit method, compute the value to be assigned to the inventory as of September 30, 2008, and prepare an income statement for the 9 month period ending on this date.