Question

Larkspur Corporation’s April 30 inventory was destroyed by fire. January 1 inventory was $162,700, and purchases for January through April totaled $458,700. Sales revenue for the same period were $638,800. Larkspur’s normal gross profit percentage is 30% on sales. Using the gross profit method, estimate Larkspur’s April 30 inventory that was destroyed by fire. Estimated ending inventory destroyed in fire

Answer 1

$174,240

Step-by-step explanation:

Beginning inventory = $162,700

Purchases = $458,700

Sales revenue = $638,800

Cost of goods sold = sales × ( 1 - Gross profit )

= sales × ( 1 - Gross profit )

= $638,800 × ( 1 - 0.30 )

= $638,800 × 0.70

= $447,160

Now,

Estimated ending inventory destroyed in fire

= Beginning inventory + purchases - Cost of goods sold

= $162,700 + $458,700 - $447,160

= $174,240