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 \$

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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