Question

Gross Profit Method: Estimation of Fire Loss

On September 28, 2016, a fire destroyed the entire merchandise inventory of Carroll Corporation. The following information is available:

Sales, January 1–September 28, 2016	$560,000
Inventory, January 1, 2016	$150,000
Merchandise purchases, January 1–September 28, 2016 (including $50,000 of goods in transit on September 28, 2016, shipped FOB shipping point)	$476,000
Markup percentage on cost	25%

Required:

What is the estimated inventory on September 28, 2016, immediately prior to the fire?

CARROLL CORPORATION
Calculation of estimated inventory on
September 28, 2016 (prior to the fire)
Beginning inventory	$
Purchases on hand
Cost of goods available for sale	$
Less: Cost of goods sold
Inventory on hand September 28, 2016, and destroyed by the fire	$

Answer 1

CARROLL CORPORATION
Calculation of estimated inventory on
September 28, 2016 (prior to the fire)
Beginning inventory	$   150,000
Purchases on hand ($476,000-$50,000)	$   426,000
Cost of goods available for sale	$   576,000
Less: Cost of goods sold ($560,000/100*25)	$   448,000
Inventory on hand September 28, 2016, and destroyed by the fire	$   128,000

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