Question

The inventory was destroyed by fire on December 31. The following data were obtained from the...

The inventory was destroyed by fire on December 31. The following data were obtained from the accounting records:

Jan. 1 Inventory $353,500
Jan. 1 - Dec. 31 Purchases (net) 2,369,000
Sales (net) 4,400,000
Estimated gross profit rate 45%

a. Estimate the cost of the inventory destroyed.

Estimated Cost of Merchandise Destroyed
Inventory, January 1 $
Purchases (net), January 1-December 31
Merchandise available for sale $
Sales, January 1-December 31 $
Estimated gross profit
Estimated cost of goods sold
Estimated inventory, December 31 $
Business   Accounting   
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Homework Answers

Answer #1

Sales = $4,400,000

Gross profit rate = 45%

Gross profit = Sales x Gross profit rate

= 4,400,000 x 45%

= $1,980,000

Cost of goods sold = Sales - Cost of goods sold

= 4,400,000-1,980,000

= $2,420,000

Estimated Cost of Merchandise Destroyed
Inventory, January 1 $353,500
Purchases (net), January 1-December 31 2,369,000
Merchandise available for sale $2,722,500
Sales, January 1-December 31 $4,400,000
Estimated gross profit -1,980,000
Estimated cost of goods sold -2,420,000
Estimated inventory, December 31 $302,500
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