Question

Adams Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $41,800. Purchases since January 1 were $77,000; freight-in, $3,400; purchase returns and allowances, $2,200. Sales are made at 33 1/3% above cost and totaled $94,700 to March 9. Goods costing $11,200 were left undamaged by the fire; remaining goods were destroyed.a. Compute the cost of goods destroyed. (Round gross profit percentage and final answer to 0 decimal places, e.g. 15% or 125.) Cost of goods destroyed $b. Compute the cost of goods destroyed, assuming that the gross profit is 33 1/3% of sales.

Answer 1

Lost inventory when sales is 133.33% of costs of sale is $$37,773.00

Lost inventory when profit is 33.33% of sales is $45,664.00

Step-by-step explanation:

Opening merchandise $41,800

Purchases $77,000

Carriage-inwards(freight-in) $3,400

returns and allowances ($2,200)

Costs of goods available for sale $120,000

Sales $94,700

Gross profit($94,700*33.33%/133.33%) ($23,673)

Cost of goods sold $71,027

closing inventory($120,000-$71,027) $48,973.00

Inventory left fire outbreak ($11,200.00)

inventory lost to fire $37,773.00

If gross profit is 33.33% of sales

Opening merchandise $41,800

Purchases $77,000

Carriage-inwards(freight-in) $3,400

returns and allowances ($2,200)

Costs of goods available for sale $120,000

Sales $94,700

Gross profit($94,700*33.33%/100.00%) ($31,564)

Cost of goods sold $63,136

closing inventory($120,000-$63,136) $ 56,864.00

Inventory left fire outbreak ($11,200.00)

inventory lost to fire $45,664.00