Question

A fire destroyed most of the inventory in Mick’s warehouse on September 1. After the fire, Mick’s accounting records showed the following: Inventory, January 1 $ 55,000 Purchases, January 1 through September 1 $ 310,000 Sales, January 1 through September 1 $ 370,000 Inventory not damaged by fire $ 45,000 Gross profit percentage on sales 30 % What amount of inventory was lost in the fire?

Answer 1

$61,000

Step-by-step explanation:

For computing the inventory lost in fire, first we have to determine the various items like - cost of goods available for sale, gross profit, cost of goods sold and ending inventory

So, the cost of goods available for sale would equal to

= Opening inventory + purchase made

= $55,000 + $310,000

= $365,000

The gross profit would be

= Sales × Gross profit percentage

= $370,000 × 30%

= $111,000

And, the costs of goods sold would be

= Sales - gross profit

= $370,000 - $111,000

= $259,000

Now the ending inventory would be

= Cost of goods available for sale - costs of goods sold

= $365,000 - $259,000

= $106,000

And, the not damaged goods were $45,000

So, the lost goods would be

= $106,000 - $45,000

= $61,000