Mark Price 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 ....... $ 160,000

Purchases (gross) ...... 640,000

Freight-in .......... 30,000

Sales revenue ....... 1,000,000

Sales returns ........... 70,000

Purchase discounts ....... 12,000

Instructions

(a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales.

(b) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost.