Burrows Shoe Company has a periodic inventory system and uses the gross margin method of estimating inventories for interim financial statements. The company had the following account balances for the fiscal year ended August 31, 2017:

Inventory: Sep. 1, 2016 .............$ 195,000

Purchases ..............................1,157,000

Purchases returns and allowances ... 23,000

Freight in .............................. 11,000

Sales ................................1,922,000

Sales returns and allowances ... 22,000

Required

1. Use the gross margin method to estimate the cost of the business's ending inventory, assuming the business has an average cost of 60 percent.

2. The business has done a physical count of the inventory on hand on August 31, 2017. For convenience, this inventory was calculated using the retail selling prices marked on the goods, which amounted to $252,000. Use the information from Requirement 1 and the gross margin method to calculate the cost of the inventory counted.