Question 2 Suzuki Company lost all of its inventory in a fire on December 26, 20

Question

Question 2 Suzuki Company lost all of its inventory in a fire on December 26, 2015. The accounting records showed the following gross profit data for November and December. November December (to 12/26) Net sales $599,676 $701,000 Beginning inventory 32,100 35,200 Purchases 385,900 422,000 Purchase returns and allowances 13,200 15,000 Purchase discounts 8,500 9,300 Freight-in 8,900 9,900 Ending inventory 35,200 ? Suzuki is fully insured for fire losses but must prepare a report for the insurance company. Compute the gross profit rate for November. (Round answer to 1 decimal place, e.g. 25.5%.) The gross profit rate for the month of November % Using the gross profit rate for November, determine the estimated cost of the inventory lost in the fire. (Round answer to 0 decimal places, e.g. 125.) Inventory lost in the fire in December $

Explanation / Answer

Compute the gross profit rate for November. (Round answer to 1 decimal place, e.g. 25.5%.)

The gross profit rate for the month of November 38.3%

Working

Gross Profit % = Grossprofit/Sales

Gross Profit % = 229676/599676

Gross Profit % = 38.30%

Using the gross profit rate for November, determine the estimated cost of the inventory lost in the fire. (Round answer to 0 decimal places, e.g. 125.)

Using the gross profit rate for November

Gross Profit for December = Net sales*Gross profit rate

Gross Profit for December = 701000*38.3%

Gross Profit for December = $ 268,483

Cost of Good Sold = Sale - Gross Profit for December

Cost of Good Sold = 701000 - 268483

Cost of Good Sold = $ 432517

Ending Inventory = Beginning Inventory + Net Purchases - Cost of Good Sold

Ending Inventory = 35200 + 407600 - 432517

Ending Inventory = 10283

Inventory lost in the fire in December $ 10,283

Novemebr Net sales [a] 599676 Beginning inventory [b] 32100 Purchases [c] 385900 Add : Freight-in [d] 8900 Less : Purchase returns and allowances [e] 13200 Less : Purchase discounts [f] 8500 Net Purchases [g = c+d-e-f] 373100 Ending inventory [h] 35200 Cost of Good Sold [i= b+g - h] 370000 Gross Profit [j = a-i] 229676

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