E9.14 (LO 4) (Gross Profit Method) 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.