Question

A tsunami destroyed Sanraku Company's warehouse and all of its inventory. Sanraku's prior-year balance sheet reported inventory of $2,853. Sanraku's management believes that last years gross profit percentage is a good estimate of the gross profit in the current year. Sanraku's sales last year were $43,300 and its cost of goods sold was $23,815. Before the tsunami, Sanraku's net sales were $23,000. Sanraku's purchased $17,530 of inventory Of the inventory purchased, $701 had not yet been delivered to Sanraku. Requirements Use the gross profit method to determine the following: What is Sanraku's historical gross profit percentage?

Answer 1

Sanraku's historical gross profit percentage is calculated by dividing last year's gross profit ($19,485) by last year's total sales ($43,300) and multiplying by 100, resulting in approximately 44.98%.

Step-by-step explanation:

To determine Sanraku's historical gross profit percentage, we must first calculate the gross profit in dollar terms from the prior year's data provided. Gross profit is calculated by subtracting the cost of goods sold (COGS) from total sales. The formula to calculate gross profit is:

Gross Profit = Sales - Cost of Goods Sold

Using last year's figures for Sanraku, we get:

Gross Profit = $43,300 (Sales) - $23,815 (COGS)

This results in a gross profit of $19,485. To find the gross profit percentage, we divide this figure by the total sales and then multiply by 100 to get the percentage:

Gross Profit Percentage = ($19,485 / $43,300) × 100%

So, Sanraku's historical gross profit percentage is approximately 44.98%.