Gross Profit Method
Kiowa Ltd Instructions
Calculate the Estimated Cost of the Inventory on May

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:
$\begin{array}{llcc} \text {Accounts receivable, May 1 } & \$31,000 \\ \text { Accounts receivable, May 31.} &37,000\\ \text { Collections of accounts during May. } &94,000\\ \text {Inventory, May 1. } &47,000\\ \text {Purchases during May } &75,000\\ \end{array}$
Instructions
Calculate the estimated cost of the inventory on May 31.

Correct Answer:

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