Question

Exercise 6-20 a-b The inventory of Hang Company was destroyed by fire on March 1. From an examination of the accounting records, the following data for the first 2 months of the year are obtained: Sales Revenue $51,000, Sales Returns and Allowances $1,000, Purchases $31,200, Freight-In $1,200, and Purchase Returns and Allowances $1,400. nation of the accounting records, the following data for the first 2 months of the year are Determine the merchandise lost by fire, assuming: A beginning inventory of $20,000 and a gross profit rate of 30% on net sales. Estimated cost of merchandise lost A beginning inventory of $30,000 and a gross profit rate of 40% on net sales. Estimated cost of merchandise lost

Answer 1

• Requirement 1: GP 30% of sale

	Beginning Inventory	$20,000
	Purchases	$31,200
	Frieght In	$1,200
	Purchase return & allowances	($1,400)
A	Cost of Goods available for sale		$51,000
	Sales revenue	$51,000
	Sales return & allowances	($1,000)
	Net Sales	$50,000
	Gross Profits ($50000 x 30%)	($15,000)
B	Cost of Goods Sold		$35,000
C = A - B	Estimated cost of merchandise lost		$16,000	Answer

• Requirement 2: GP 40% of net sale

	Beginning Inventory	$30,000
	Purchases	$31,200
	Freight In	$1,200
	Purchase return & allowances	($1,400)
A	Cost of Goods available for sale		$61,000
	Sales revenue	$51,000
	Sales return & allowances	($1,000)
	Net Sales	$50,000
	Gross Profits ($50000 x 40%)	($20,000)
B	Cost of Goods Sold		$30,000
C = A - B	Estimated cost of merchandise lost		$31,000	Answer