On May 2, 20X2, a fire destroyed the entire merchandise inventory on hand of Pin

Question

On May 2, 20X2, a fire destroyed the entire merchandise inventory on hand of Pinks Corporation. The following information is available. 13. PINKS CORPORATION DATA TO ESTIMATE COST OF INVENTORY AT MAY 2, 20X2 Sales, January 1 through May 2, 20X2 Inventory, January 1, 20X2 Merchandise purchases, January 1, through May 1, 360,000 90,000 20X2 (including $40,000 of goods in transit on May 2, 20X2, shipped FOB shipping point) 330,000 20% Markup percentage on cost What is the estimated cost of the inventory that was destroyed on May 2, 20X2, immediately prior to the fire? (a) 80,000. (b) S 92,000. (c) $120,000. (d) $132,000.

Explanation / Answer

Cost of goods sold = 360000/120*100= 300000 Cost of goods available = 90000+330000-40000= 380000 Cost of inventory destroyed = 380000-300000 = 80000 Option A is correct

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