On July 8, a fire destroyed the entire merchandise inventory on
hand of Larrenaga Wholesale Corporation. The following information
|Sales, January 1 through July 8||$||691,000|
|Inventory, January 1||130,000|
|Purchases, January 1 through July 8||654,000|
|Gross profit ratio||26||%|
What is the estimated inventory on July 8 immediately prior to the fire?
Sales = $691,000
Gross profit ratio = 26%
Gross profit = Sales x Gross profit ratio
= 691,000 x 26%
Cost of goods sold = Sales - Gross profit
Cost of goods sold = Inventory, January 1 + Purchases- Ending inventory
511,340 = 130,000+654,000-Ending inventory
Ending inventory = $272,660
the estimated inventory on July 8 immediately prior to the fire is $272,660
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