Halloween Costumes estimates its inventory by the gross profit method

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P6-36A Estimating ending inventory by the gross profit method and preparing the
income statement [25–30 min]

Halloween Costumes estimates its inventory by the gross profit method. The gross
profit has averaged 30% of net sales. The company’s inventory records reveal the following
data:

Inventory, May 1 $ 270,000
Transactions during May:
Purchases ........................7,520,000
Purchase discounts ..........146,000
Purchase returns..............37,000
Sales................................8,719,000
Sales returns....................27,000

Requirements
1. Estimate the May 31 inventory, using the gross profit method.
2. Prepare the May income statement through gross profit for Halloween Costumes.