**Larkspur Company Inventory Estimation: May Data**Larkspur Company employs the gross profit method to estimate inventory for monthly reporting purposes. Below is the financial information for May:- **Inventory, May 1:** $156,500- **Purchases (gross):** $628,400- **Freight-in:** $31,900- **Sales revenue:** $1,029,400- **Sales returns:** $74,600- **Purchase discounts:** $10,800**Task (a):**Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales.**Estimated Inventory Calculation:**- **Estimated Inventory at May 31:** [Blank space for calculation]This section is designed for educational purposes to help students understand the process of estimating inventory using the gross profit method. The data should be used to perform calculations to find the estimated ending inventory, taking into account the gross profit margin provided.

Answered: urchases (gross) eight-in les revenue…

Business

Accounting

urchases (gross) eight-in les revenue les returns 628,400 31,900 1,029,400 74,600

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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**Larkspur Company Inventory Estimation: May Data**

Larkspur Company employs the gross profit method to estimate inventory for monthly reporting purposes. Below is the financial information for May:

- **Inventory, May 1:** $156,500
- **Purchases (gross):** $628,400
- **Freight-in:** $31,900
- **Sales revenue:** $1,029,400
- **Sales returns:** $74,600
- **Purchase discounts:** $10,800

**Task (a):**

Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales.

**Estimated Inventory Calculation:**

- **Estimated Inventory at May 31:** [Blank space for calculation]

This section is designed for educational purposes to help students understand the process of estimating inventory using the gross profit method. The data should be used to perform calculations to find the estimated ending inventory, taking into account the gross profit margin provided.

Expert Solution

Step 1

a retail operation does not mention the cost of goods manufactured, as it sells the products that are produced or manufactured by others. Hence, selling cost covers the commodities which are being resold.

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