Finding cost of goods destroyed
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Alan Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $35,300. Purchases since January 1 were $66,700; freight-in, $3,400; purchase returns and allowances, $2,400. Sales are made at 33 1/3% above cost and totaled $101,400 to March 9. Goods costing $11,200 were left undamaged by the fire; remaining goods were destroyed.
a. Compute the cost of goods destroyed. (Round gross profit percentage and final answer to 0 decimal places, e.g. 15% or 125.)
b. Compute the cost of goods destroyed, assuming that the gross profit is 33 1/3% of sales. (Round ratios for computational purposes to 5 decimal places, e.g. 78.72345% and final answer to 0 decimal places, e.g. 28,987.)
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Solution Summary
The solution shows the steps to find the cost of inventories destroyed by fire.
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Solution:
a. Cost of goods destroyed = $15,750
[Cost of goods sold = 76,050 (when sales is 33 1/3 above cost and sales = 101,400); Ending inventory = 35300 + net purchases ...
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