Question

A company's inventory was destroyed in a fire on January 28, 2019. The company's December 31,...

A company's inventory was destroyed in a fire on January 28, 2019. The company's December 31, 2018 inventory had a cost of $40,000. The company's gross profit has consistently been 30% of sales. During January the company purchased merchandise costing $36,000 and sales of $50,000 at regular selling prices. What is the estimated cost of the inventory that was destroyed on January 28, 2019?

$26,000

$35,000

$41,000

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Answer #1

Cost of Goods available for sale

=40,000 + Purchases 36,000

= 76,000

Cost of Goods Sold = Sales - Gross profit

= 50,000 - (50,000*30%)

= 35,000

Inventory destroyed = Goods available - Cost of Goods Sold

= 76,000 - 35,000

= 41,000

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