On august 31, a hurricane destroyed a retail location of vinny\'s clothier inclu

Question

On august 31, a hurricane destroyed a retail location of vinny's clothier including the entire inventory on hand at the location. The inventory on hand as of june 30 totaled $960000. Since june 30 until the time of the hurrixane, the company made purchases of $255,000 and had sales of $750000. Assuming the rate of gross profit to selling price ks 40% what is the approximate value of the inventory that was destroyed?
A) $960000 B) $544500 C) $615000 D) $765000
I know the answer is d but i am not sure why it is 765000. Can someone explain it please? On august 31, a hurricane destroyed a retail location of vinny's clothier including the entire inventory on hand at the location. The inventory on hand as of june 30 totaled $960000. Since june 30 until the time of the hurrixane, the company made purchases of $255,000 and had sales of $750000. Assuming the rate of gross profit to selling price ks 40% what is the approximate value of the inventory that was destroyed?
A) $960000 B) $544500 C) $615000 D) $765000
I know the answer is d but i am not sure why it is 765000. Can someone explain it please?
A) $960000 B) $544500 C) $615000 D) $765000
I know the answer is d but i am not sure why it is 765000. Can someone explain it please?

Explanation / Answer

As we know:

Cost of goods Sold = op stock + purchses - closing stock

Op stock = $960,000

Purchases = $255,000

Cost of goods sold = $750,000*60% = $450,000 ( Since company has gp ratio of 40% so it means cost is 60%)

So now,

450,000 = 960,000 + 255,000 - Closing stk

Closing Stk = 960,000 + 255,000 - 450,000 = $765000

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