Question

CHAPTER 6 Inventory Costing and Valuation Pro Problem 6-13B Estimating ending inventory-gross profit method LO6 CHECK FIGURE: $81,380.50 The Zeon Company had a flood on July 5, 2020, that destroyed all of its inventory. The salvao records contained the following information: Рон ins $ 737,650 414.900 Sales, January 1 to July 5...... Net merchandise purchased Jan. 1 to July 5......... Additional information was determined from the 2019 annual report: Income statement: $2,122,550 1,337,175 Sales... Cost of goods sold................ Balance sheet: Merchandise inventory........................ 131,200 Zeon was unable to salvage any usable inventory after the water subsided. Required Determine the amount of inventory lost by Zeon as a result of the flood. Zeon has a year-end. Round the gross profit ratio to the nearest whole percentage point. Problem 6-14B Gross profit method LO6 CHECK FIGURE: $183,637.50

Answer 1

Answer

We are assuming that we are earning the same Gross Profit percentage as last year, so First we need to find out the Cost of Goods Percentage to sales.

Cost of Goods Sold (COGS) % = Cost of Goods Sold / Sales

= $1,337,175 / 2,122,550

= 62.99%

= 63% (As question requires round off)

So, Cost of Goods Sold from Jan 1 to July 5

= Sales * COGS %

= $737,650 * 63%

Cost of Goods Sold from Jan 1 to July 5 = $464,719.5                    

Cost of Goods Sold = Opening Inventory + Purchases – Lost Inventory

Lost Inventory = Opening Inventory + Purchases - Cost of Goods Sold

= $131,200 + 414,900 – 464,719.5

Lost Inventory = $81,380.5

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