Question

On March 15, a fire destroyed Sheridan Company's entire retail inventory. The inventory on hand as of January 1 totaled $5900000. From January 1 through the time of the fire, the company made purchases of $2032000, incurred freight-in of $242000, and had sales of $4140000. Assuming the rate of gross profit to selling price is 20%, what is the approximate value of the inventory that was destroyed

Answer 1

the approximate value of the inventory that was destroyed is $4,862,000.

Step-by-step explanation:

Use the Gross Profit percentage to find the value of the inventory that was destroyed.

Sales $4,140,000

Less Cost of Goods Sold

Opening Inventory $5,900,000

Add Purchases $2,032,000

Add Freight In $242,000

Available $8,174,000

Less Inventory Lost ($4,862,000)

Cost of Sales (3,312,000)

Gross Profit at 20% $828,000

Conclusion :

The Value of inventory that was destroyed is $4,862,000.