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On December 31, 2018, most of Johnson Company's inventory burned. Sales and purchases for the year...

On December 31, 2018, most of Johnson Company's inventory burned. Sales and purchases for the year had been $1,300,000 and $950,000, respectively. The beginning inventory (Jan. 1, 2018) was $150,000; in the past Johnson's gross profit has averaged 25% of selling price. The cost of undamaged inventory totaled $50,000. What is the estimated cost of inventory burned in the fire? NOTE: Show your work and label your numbers.

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Answer #1
Gross profit=Sales*gross profit %=1300000*25%=$ 325000
Gross profit=Sales-cost of goods sold
Cost of goods sold=Sales-Gross profit=1300000-325000=$ 975000
Cost of goods sold=Beginning inventory+Purchases-Ending inventory
Ending inventory=Beginning inventory+Purchases-Cost of goods sold=150000+950000-975000=$ 125000
Estimated cost of inventory burned=Total cost of Ending inventory-Cost of undamaged inventory=125000-50000=$ 75000
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