# Financial Accounting: E9-12 Mark Price Company uses the gross profit method to estimate inventory

Financial Accounting

E9-12 (Gross Profit Method)

Mark Price Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.

Inventory, May 1 160,000

Purchases (gross) 640,000

Freight-in 30,000

Sales 1,000,000

Sales returns 70,000

Purchase discounts 12,000

Instructions

(a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales.

(b) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost.

E9-12 (Gross Profit Method)

Mark Price Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.

Inventory, May 1 160,000

Purchases (gross) 640,000

Freight-in 30,000

Sales 1,000,000

Sales returns 70,000

Purchase discounts 12,000

Instructions

(a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales.

(b) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost.

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