On October 31, a fire destroyed Pharoah Inc.'s entire retail inventory. The inventory on hand as...
On October 31, a fire destroyed Pharoah Inc.'s entire retail inventory. The inventory on hand as of January 1 totaled $2740000. From January 1 through the time of the fire, the company made purchases of $672000 and had sales of $1456000. Assuming the rate of gross profit to selling price is 25%, what is the approximate value of the inventory that was destroyed? $1648000. $2320000. $2740000. $3048000.
Homework Answers
Answer is $2,320,000
Sales = $1,456,000
Gross profit = 25% * Sales
Gross profit = 25% * $1,456,000
Gross profit = $364,000
Cost of goods sold = Sales - Gross profit
Cost of goods sold = $1,456,000 - $364,000
Cost of goods sold = $1,092,000
Value of stock destroyed by fire = Beginning inventory +
Purchases - Cost of goods sold
Value of stock destroyed by fire = $2,740,000 + $672,000 -
$1,092,000
Value of stock destroyed by fire = $2,320,000
So, the approximate value of inventory that was destroyed by the fire is $2,320,000
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