Gross profit method

Kiowa Ltd. prepares monthly financial statements. Inventory is counted only at year end; thus, month-end inventories must be estimated. All sales are made on account. The rate of markup on cost is 25%. The following information relates to the month of May:

Accounts receivable, May 1 $31,000

Accounts receivable, May 31 37,000

Collections of accounts during May 94,000

Inventory, May 1 47,000

Purchases during May 75,000

Instructions

Calculate the estimated cost of the inventory on May 31.