Gheorghe Moresan Lumber Company handles three principal lines of merchandise wit

Question

Gheorghe Moresan Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost. On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were maintained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept fireproof vault and thus escaped destruction. Submit your estimate of the inventory amounts immediately preceding the fire.

Explanation / Answer

let cost be "100"

Gross profit = 100 * gross profit ratio%

sales =cost +gross proft

say for lumber ,sales = 100 + (100*.25) = 100 +25 =125

Lumber Millwork Hardware Sales 2,074,000 557,050 265,300 Cost of goods sold 2074000 *100 /125 557050*100/130 265300*100/140 = 1659200 = 428500 = 189500 Inventory at end: Inventory at beginning 268900 94780 52100 Add:Purchase 1544700 376600 162200 less:Cost of good sold (1659200) (428500) (189500) inventory at end /before fire 154400 42880 24800

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