On September 22, 2018, a flood destroyed the entire merchandise inventory on han

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:

Required:
Complete the below table to estimate the cost of inventory destroyed in the flood using the gross profit method.

Inventory, January 1, 2018 $ 147,000 Net purchases, January 1 through September 22 377,000 Net sales, January 1 through September 22 585,000 Gross profit ratio 25 %

Explanation / Answer

Particulars Amt Inventory, January 1, 2018 147,000 Net purchases, January 1 through September 22 377,000 Goods Available for Sale 524,000 Less: Cost of goods sold (585000 x 75%) 438750 Loss by fire 85,250

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