Doc Gibbs Company reported the following information for November and December 2

Question

Doc Gibbs Company reported the following information for November and December 2010.

Doc Gibbs's ending inventory at December 31 was destroyed in a fire.

A.Compute the gross profit rate for Novembe

B. Using the gross profit rate for November, determine the estimated cost of inventory lost in the fire.

Doc Gibbs Company reported the following information for November and December 2010. Doc Gibbs's ending inventory at December 31 was destroyed in a fire. Compute the gross profit rate for Novembe Using the gross profit rate for November, determine the estimated cost of inventory lost in the fire.

Explanation / Answer

Gross profit for the month November=Sales-Opening stock-Cost of purchases+Closing stock

=836900-536700-124000+150191

=$326391

Gross profit ratio=Gross profit/Sales*100

=326391/836900

=39%

Now gross profit for the month of December=Gross profit ratio*Sales of December

=39%*1140900

=$444951

Now Closing stock for the month of December=Gross profit+Opening stock+Cost of purchases-Sales

=444951+150191+697100-1140900

=151342

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