Answer:
The answer is: $395,000
Explanation:
To calculate the May 1 inventory we have to determine the cost of all goods available for sale:
goods available for sale = beginning inventory + net purchases
goods available for sale = $300,000 + $875,000 = $1,175,000
Then we must determine the cost of goods sold:
COGS = net sales - (net sales x gross profit margin)
COGS = $1,300,000 - ($1,300,000 x 40%) = $1,300,000 - $520,000 = $780,000
Finally to calculate the May 1 inventory:
May 1 inventory = goods available for sale - COGS = $1,175,000 - $780,000 = $395,000
