4. 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)	620,000
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 25% of sales.
(b)	Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.