Question

A flood destroyed a company's warehouse contents on September 12. The following information was the only information that was salvaged: 1. Inventory, beginning: $30,000 2. Purchases for the period: $19,000 3. Sales for the period: $57.000 4. Sales returns for the period: $900 The company's average gross profit ratio is 20%. What is the estimated cost of the lost inventory using the gross profit method? Multiple Choice $48,000.00 $49,000.00 $37,780.00 $39,200.00

Answer 1

Ans.	*Given options are not correct.
	The correct answer would be $4,120.
	Particulars	Amount	Amount
	Beginning inventory		$30,000
	Plus : Net purchase		$19,000
	Cost of goods available for sale		$49,000
	Less: Cost of goods sold:
	Net sales (at selling price)	$56,100
	Less: Estimated gross profit	-$11,220
	Estimated cost of goods sold		$44,880
	Estimated cost of lost inventory		$4,120
	*Calculations:
	Net sales =   Sales - Sales returns
	$57,000 - $900 =   $56,100
	Estimated gross profit = Net sales * Gross profit ratio
	$56,100 * 20%
	$11,220