Question

On April 15 of the current year, a fire destroyed the entire uninsured inventory of a retail store. The following data are available:

Sales, January 1 through April 15	$618000
Inventory, January 1	106000
Purchases, January 1 through April 15	515000
Markup on cost	20%

The amount of the inventory loss is estimated to be

Answer 1

Answer:

The amount of the inventory loss is estimated to be $ 1,06,000.

Explanation:

Calculating of amount of inventory loss:

Particulars	Amount	Amount
Opening inventory on 1st Jan	[given]	$ 1,06,000
Add: Purchases made	[given]	$ 5,15,000
Less: Cost of goods sold	[from working notes]	$ 5,15,000
Closing inventory		$ 1,06,000

Working Note :

Calculation of cost of goods sold:

Sales		$ 6,18,000
Less: Mark up cost	= $ 6,18,000*20/120 = $ 1,03,000	$ 1,03,000
Cost of goods sold	$ 6,18,000 - $ 1,03,000 = $ 5,15,000	$ 5,15,000