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 $ 154,000 Net purchases, January 1 through September 22 384,000 Net sales, January 1 through September 22 620,000 Gross profit ratio 20 %

Explanation / Answer

Net sales 620000 Gross profit (620000*20%) 124000 Cost of goods sold 496000 Inventory january1,2018 154000 Net purchases 384000 Cost of goods available 538000 Less : cost of goods sold 496000 Estimated cots of inventory distroyed 42000

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