Gross Profit Method

Royal Gorge Company uses the gross profit method to estimate ending inventory and cost of goods sold when preparing monthly financial statements required by its bank. Inventory on hand at the end of October was $58400. The following information for the month of November was available from company records:

Purchases of $114000

Freight-in of $3900

Sales of $188000

Sales Returns of $5200

Purchase Returns of $4300

In addition, the controller is aware of $8600 of inventory that was stolen during November from one of the company's warehouses.

Required:

1. Using the template below, calculate the estimated inventory at the end of November, assuming a gross profit ratio of 37%.

Beginning Inventory		58400
Plus: Net purchases		??
Freight-in		3900
Cost of Goods Available for Sale		??
Less: Cost of Goods Sold
Net Sales	??
Less Estimated Gross Profit	??
Estimated Cost of Goods Sold		??
Estimated Inventory before Theft		??
Less: Stolen Inventory		8600
Estimated Ending Inventory		??

2. Using the template below, calculate the estimated inventory at the end of November, assuming a markup on cost of 100%.

Beginning Inventory		58400
Plus: Net purchases		??
Freight-in		3900
Cost of Goods Available for Sale		??
Less: Cost of Goods Sold
Net Sales	??
Less Estimated Gross Profit	??
Estimated Cost of Goods Sold		??
Estimated Inventory before Theft		??
Less: Stolen Inventory		8600
Estimated Ending Inventory		??

1. Net Purchases 1. Cost of Goods Available for Sale 1. Net Sales 1. Estimated Gross Profit 1. Estimated Cost of Goods Sold 1. Estimated Inventory before Theft 1. Estimated Ending Inventory 2. Net Purchases 2. Cost of Goods Available for Sale 2. Net Sales 2. Estimated Gross Profit 2. Estimated Cost of Goods Sold 2. Estimated Inventory before Theft 2. Estimated Ending Inventory