on august 15 2012 a hurricane damaged a warehouse of folkman merchandise company

Question

on august 15 2012 a hurricane damaged a warehouse of folkman merchandise company. the entire inventory and many accounting records stored in the warehouse were completely destroyed. although the inventory was not insured, a portion could be sold for scrap. through the use of microfilmed records, the following data is assembled: Goods on hand august 1-$80,000, purchases-160,000, purchase returns-2,000, transportation costs on purchases-1,000, sales- 280,000, sales return-4,000, and average gross profit as a percent of net sales-40%.... compute the inventory loss as a result of the hurricane. label your work.

Explanation / Answer

gross profit /sales=40% => sales-cost )/sales = 0.4 => cost=0.6 *280000 =$168000 initial inventor = $80,000 purchases = $160000 purchase returns =$2000 total inventory in august = 80000+160000+2000 =$242,000 but cost = $168000 so inventorty loss = 242000-168000 =$74000

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