Adams Legler requires an estimate of the cost of goods lost by fire on March 9.

Question

Adams Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $41,800. Purchases since January 1 were $77,000; freight-in, $3,400; purchase returns and allowances, $2,200. Sales are made at 33 1/3% above cost and totaled $94,700 to March 9. Goods costing $11,200 were left undamaged by the fire; remaining goods were destroyed.

a. Compute the cost of goods destroyed. (Round gross profit percentage and final answer to 0 decimal places, e.g. 15% or 125.) Cost of goods destroyed $

b. Compute the cost of goods destroyed, assuming that the gross profit is 33 1/3% of sales.

Explanation / Answer

a. Compute the cost of goods destroyed.

b. Compute the cost of goods destroyed, assuming that the gross profit is 33 1/3% of sales.

Beginning inventory 41800 Purchase 77000 Freight in 3400 Less: purchase return and allowances (2200) Net purchase 78200 Total cost of goods available for sale 120000 Sales 94700 Less: Gross profit (23675) Cost of goods sold (71025) Ending inventory 48975 Less: Undamaged goods (11200) Damage goods 37775

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