Pharoah 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
$149,100
Purchases (gross)
683,200
Freight-in
28,700
Sales revenue
998,600
Sales returns
76,500
Purchase discounts
11,000
(a)
Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales.
The estimated inventory at May 31
S
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(b)
Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost. (Round percentage of sales to 2 decimal
places, e.g. 78.74% and final answer to 0 decimal places, e.g. 6,225.)
The estimated inventory at May 31
S