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: Inventory, January 1, 2018 Net purchases, January 1 through September 22 Net sales, January 1 through September 22 Gross profit ratio $157,000 387,000 635,000 30% Required: Complete the below table to estimate the cost of inventory destroyed in the flood using the gross profit method Beginning inventory Plus: Net purchases Cost of goods available for sale Less: Cost of goods sold: Net sales Less: Estimated gross profit Estimated cost of goods sold Estimated cost of inventory destroyed

Explanation / Answer

Beginning Inventory $ 1,57,000 Plus: Net purchases $ 3,87,000 Cost of goods available for sale $ 5,44,000 Less: Cost of goods sold Net sales $ 6,35,000 Less: Estimeted gross profit ($6,35,000 X 30%) $ 1,90,500 Estimated cost of goods sold $ 4,44,500 Estimated cost of inventory destroyed $     99,500

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