Question

Exercise 9-18

Cullumber Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost.

Lumber		25%
Millwork		30%
Hardware and fittings		40%

On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were maintained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction.

		Lumber		Millwork		Hardware
Inventory, Jan. 1, 2017		$246,700		$91,800		$45,200
Purchases to Aug. 18, 2017		1,499,400		375,000		159,800
Sales to Aug. 18, 2017		2,085,500		509,600		226,800

Submit your estimate of the inventory amounts immediately preceding the fire. (Round ratios for computational purposes to 5 decimal places, e.g. 78.74265% and final answers to 0 decimal places, e.g. 28,987.)

		Lumber		Millwork		Hardware
Inventory		$		$		$

Answer 1

Workings to find G/P % on sales	Lumber	Millwork	Hardware
1.Cost	100	100	100
2.G/P on cost(given)	25	30	40
3.Selling price(Cost+G/P)(1+2)	125	130	140
4.so, G/P on s.p.----(G.P/S.P)(2/3)	20.00%	23.08%	28.57%
	Lumber	Millwork	Hardware
1.Sales to Aug. 18, 2017	2,085,500	509,600	226,800
2.G/P on cost(given)	25%	30%	40%
3.G/P on sales(Ref. wkgs.)	20.00%	23.08%	28.57%
4.$ G/P on above sales(1*3)	417100	117600	64800
5.Cost of Goods sold(1-4)	1,668,400	392,000	162,000
Estimate of the inventory amounts immediately preceding the fire
1.Inventory, Jan. 1, 2017	246700	91800	45200
2.Add:Purchases to Aug. 18, 2017	1,499,400	375,000	159,800
3.Less: COGS upto Aug.18,2017(as above)	1668400	392000	162000
4.Estimated cost of Inventory preceding the fire(1+2-3)	77,700	74,800	43,000