Answer:
The estimated inventory at May 31 is $240,100
Explanation:
The gross profit is the difference between the sales revenue and the cost of good sold.
The gross profit percentage is the ratio of gross profit to net sales expressed as a percentage.
Net sales is the sales less returns and allowances. Similar to net sales is net purchases which is the gross purchase net the allowances and returns.
Net purchases = $697,000 - $12,100
= $684,900
Net sales = $924,000 - $73,200
= $850,800
Gross profit margin percent = gross profit/net sales
gross profit = 0.4 * $850,800
= $212,700
cost of goods sold = $850,800 - $212,700
= $638,100
The movement in the balance of inventory at the start and end of a period is as a result of sales and purchases. While sales reduces the balance in inventory, purchases increases the balance. This may be expressed mathematically as
Opening balance + purchases + freight inward - cost of goods sold = closing balance
$161,900 + $684,900 + $31,400 - $638,100 = Estimated ending inventory
Estimated ending inventory = $240,100
