Ayayai Lumber Company handles three principal lines of merchandise with these va
ID: 2519822 • Letter: A
Question
Ayayai 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 in a fireproof vault and thus escaped destruction.
Lumber
Millwork
Hardware
Submit your estimate of the inventory amounts immediately preceding the fire. (Round ratios for computational purposes to 5 decimal places, e.g. 78.74265% and final answers to 0 decimal places, e.g. 28,987.)
Lumber
Millwork
Hardware
Lumber 25% Millwork 30% Hardware and fittings 40%Explanation / Answer
Answer
This means if GP is 25% of cost, the sales will be 125% of cost
[Cost + GP = Sales]
[100 + 25 = 125]
Sales are given, hence, cost of goods Sold (or cost) = Sales / 100%+GP%
Working
Lumber
Millwork
Hardware
A
Sales
$ 21,19,600.00
$ 5,08,300.00
$ 2,12,800.00
B
GP on Cost
25%
30%
40%
C=100% + B
% of Sales on Cost
125%
130%
140%
D=A / C
Cost of Goods Sold
$ 16,95,680.00
$ 3,91,000.00
$ 1,52,000.00
Working
Lumber
Millwork
Hardware
A
Inventory Jan 1, 2007
$ 2,50,100.00
$ 90,100.00
$ 45,300.00
B
Purchases
$ 15,12,300.00
$ 3,80,800.00
$ 1,59,000.00
C
Cost of Goods Sold
$ 16,95,680.00
$ 3,91,000.00
$ 1,52,000.00
D=A+B-C
Ending Inventory preceding fire
$ 66,720.00
$ 79,900.00
$ 52,300.00
Working
Lumber
Millwork
Hardware
A
Sales
$ 21,19,600.00
$ 5,08,300.00
$ 2,12,800.00
B
GP on Cost
25%
30%
40%
C=100% + B
% of Sales on Cost
125%
130%
140%
D=A / C
Cost of Goods Sold
$ 16,95,680.00
$ 3,91,000.00
$ 1,52,000.00
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