You are auditing the records of Lin Corp. The company took a physical inventory under your observation. However, the valuations have not been completed. The records of the company provide the following data: sales, $400,000 (gross); returned sales, $17,500 (returned to stock); purchases (gross), $250,000; beginning inventory, $160,000; freight in, $8,000; and purchase returns and allowances, $7,000. The gross margin last period was 25% of net sales; you anticipate that it will average 30% for the year under audit.

Required:

Estimate the cost of the ending inventory and the cost of sales using the gross margin method. Show all calculations.