Question

On September 22, 2018, a flood destroyed the entire merchandise inventory on hand in a warehouse owned by the Rocklin Sporting Goods Company. The following information is available from the records of the company's periodic inventory system: Inventory, January 1, 2018 Net purchases, January 1 through September 22 Net sales, January 1 through September 22 Gross profit ratio $ 158,000 388,000 640,000 253 Required: Complete the below table to estimate the cost of inventory destroyed in the flood using the gross profit method. Beginning inventory Plus: Net purchases Cost of goods available for sale Less: Cost of goods sold: Net sales Less: Estimated gross profit Estimated cost of goods sold Estimated cost of inventory destroyed

Answer 1

Estimated cost of inventory destroyed = $66,000

Beginning inventory		$158,000
Plus: Net purchases		388,000
Cost of goods available for sale		$546,000
Less: cost of goods sold
Net sales	$640,000
less: estimated gross profit(640000 * 25%)	160,000
estimated cost of goods sold		480,000
Estimated cost of inventory destroyed		$66,000