Question

Tamarisk corporation april 30 inventory was destroyed by fire. january 1 inventory was 137600 and purchases for january through april totaled 506800. sales revenue for the same period was 750500. tamarisk normal gross profit percentage is 25% on sales. using the gross profit method estimate tamarisk april 30 inventory that was destoryed by fire?

a) $196,500
b) $213,200
c) $230,400
d) $189,800

Answer 1

To estimate the destroyed inventory using the gross profit method, Tamarisk Corporation's COGS is calculated by subtracting the gross profit from sales revenue. Then, subtracting COGS from total goods available provides the estimated ending inventory. The calculated estimate is $81,525, which does not match the multiple-choice options provided.

Step-by-step explanation:

To estimate the inventory destroyed by fire using the gross profit method, we need to calculate the cost of goods sold (COGS) and then use that to figure out the value of the ending inventory. First, deduct the gross profit from the sales revenue to find the COGS. The gross profit is calculated by multiplying the normal gross profit percentage by the sales revenue.The formula to calculate the COGS is:COGS = Sales - Gross ProfitUsing the provided data:

Gross Profit = Sales Revenue x Gross Profit Percentage = $750,500 x 25% = $187,625Then, COGS = $750,500 - $187,625 = $562,875To get the ending inventory before the fire, we will subtract the COGS from the total goods available for sale:Ending Inventory = Beginning Inventory + Purchases - COGSEnding Inventory = $137,600 + $506,800 - $562,875 = $81,525So, the estimated value of Tamarisk Corporation's April 30 inventory that was destroyed by fire is $81,525, which is not one of the options given. It seems there might be an error in the options provided.