Question

Sunland Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $35,720. Purchases since January 1 were 167,680, freight-in, 13,196; purchase returns and allowances, $2,256. Sales are made at 33/ above cost and totaled $105,000 to March 9. Goods costing $10,246 were left undamaged by the fire remaining poods were destroyed. Compute the cost of goods destroyed. (Round gross profit percentage and final answer to decimal placer .. 15% or 125.) Cost of goods destroyed LINK TO TEXT of sales. (Round ratios for computational purposes to 5 decimal places, eg. 78.72345and final Compute the cost of goods destroyed, assuming that the gross profit is 33 answer to o decimal places, e.g. 28,987.) Cost of goods destroyed

Answer 1

(1)

Gross profit rate = 33 1/3% on cost = 25% on sales

Cost of goods sold = sales - gross profit

= $105000 - ($105000 x 25%)

= $78750

cost of goods sold = beginning inventory + purchases - ending inventory

therefore,

ending inventory = beginning inventory + purchases - cost of goods sold

= $35720 + ($67680 + $3196 - $2256) - $78750

= $35720 + 68620 - $78750

= $25590

therefore cost of goods destroyed = $25590

(2)

gross profit rate = 33 1/3 on sales

Cost of goods sold = sales - gross profit

= $105000 - ($105000 x 33 1/3%)

= $70000

cost of goods sold = beginning inventory + purchases - ending inventory

therefore,

ending inventory = beginning inventory + purchases - cost of goods sold

= $35720 + ($67680 + $3196 - $2256) - $70000

= $35720 + 68620 - $70000

= $34340

therefore cost of goods destroyed = $34340