Question

The Wolfe Company recently lost it's entire inventory in a fire. The accounting records reflect the following information: Beginning Inventory $32,000 Net Purchases Net Sales Gross Profit Rate $220,400 $378,800 40% Using the gross profit method, estimated inventory is: OA. $100,960 B. $25,120 O C. $32,000 O D. Cannot be determined with given information

Answer 1

1

Cost of Goods sold=378800*(1-40%)

227280

Beginning Inventory	$     32,000.00
Purchase	$ 2,20,400.00
Less Cost of goods sold	$ 2,27,280.00
Ending Inventory	$     25,120.00

2

Answer is Option D

Debit the Inventory and Credit the Cost of goods sold @1500

3

Income statement
sales		$ 1,24,000.00
Less
Cost of Goods sold	$     74,000.00
Operating Expense	$     46,000.00
Other Expense	$       3,000.00	$ 1,23,000.00
Net Income		$       1,000.00