Question

The Jamison Company's inventory was destroyed on July 4, 2016, when its warehouse caught on fire early in the morning. Inventory was totally destroyed. The accounting records, which were located in a fireproof vault, contained the following information: Sales (1/1/16 through 7/3/16)$240,000 Purchases (1/1/16 through 7/3/16)180,000 Inventory (1/1/16)45,000 Gross profit ratio25% of cost Using the gross profit method, what is the estimated cost of the inventory that was destroyed by the fire

Answer 1

$15,000

Step-by-step explanation:

With regards to the above information, the estimated cost of inventory that was destroyed by fire is computed as

= [Sales - (Purchases + Inventory)]

Given that;

Sales 1/1/16 through 7/3/16 = $240,000

Purchases 1/1/16 through 7/3/16 = $180,000

Inventory 1/1/16 = $45,000

= [$240,000 - ($180,000 + $45,000)]

= $240,000 - $225,000

= $15,000