Question

On January 1, a store had inventory of $48,000. January purchases were $46,000 and January sales were $90,000. On February 1 a fire destroyed most of the inventory. The rate of gross profit was 25% of cost. Merchandise with a selling price of $7,500 remained undamaged after the fire. Compute the amount of the fire loss, assuming the store had no insurance coverage. Label all figures.

Answer 1

the amount of the fire loss is $16,000

Step-by-step explanation:

The computation of the amount of the fire loss is shown below

January 1 inventory $48,000

Add purchases $46,000

Goods Available $94,000

Less Cost of Goods Sold ($90,000 × 100 ÷ 125) $72,000

Less Cost of undamaged goods ($7,500 × 100 ÷ 125) $6,000

Goods Lost by Fire $16,000

hence, the amount of the fire loss is $16,000