Problem #3 (GrossProfit Method) Schmidt Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May Inventory, May1 Purchases (gross) Freight-in Sales Sales returns Purchase discounts 40,000 160,000 7,500 17,500 3,000 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