Question

On December 31, 2018 Felt Company's inventory burned. Sales and purchases for the year had been $1,500,000 and $980,000, respectively. The beginning inventory (Jan. 1, 2018) was $170,000; in the past Felt's gross profit has averaged 30% of selling price.

Required: Please show all calculations
Compute the estimated loss of inventory burned. Your solution should be in good form with amounts clearly labeled.

Answer 1

Sales and purchases for the year had been $1,500,000 and $980,000, respectively. The beginning inventory (Jan. 1, 2018) was $170,000; in the past Felt's gross profit has averaged 30% of selling price.

Gross profit = 30% of sales

= 1,500,000 x 30%

= $450,000

Cost of goods sold = Sales - Gross profit

=1,500,000 - 450,000

= $1,050,000

Beginning inventory	170,000
Purchases	980,000
Cost of goods available for sale	1,150,000
Cost of goods sold	- 10,50,000
Estimated loss of inventory burned	$100,000

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