(5 points) Hornacek 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 $ 110,000 Purchases (gross) 720,000 Freight-in 32,000 Sales revenue 1,050,000 Sales returns 70,000 Purchase discounts 18,000 Instructions (a) Compute the estimated inventory at May 31, assuming that the gross profit is 20% of sales. (b) Compute the estimated inventory at May 31, assuming that the gross profit is 20% of cost.

Instructions Using the lower-of-cost-or-market rule, determine the proper unit value for balance sheet reporting purposes at December 31,2014 , for each of the inventory items above. 6. (5 points) Hornacek Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May. Instructions (a) Compute the estimated inventory at May 31, assuming that the gross profit is 20% of sales. (b) Compute the estimated inventory at May 31, assuming that the gross profit is 20% of cost