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In: Accounting

On January 1, Bronson Stores had inventory valued at $124,000. January purchases were $78,000, and January...

On January 1, Bronson Stores had inventory valued at $124,000. January purchases were $78,000, and January sales were $220,000. On February 1, a fire destroyed most of the inventory on hand. The average gross profit is 25% of sales. Merchandise with a value of $10,000 remained undamaged after the fire.
Using the gross profit method, calculate the estimated value of inventory that was destroyed in the fire.

Solutions

Expert Solution

The estimated value of inventory that was destroyed in the fire is calculated as follows:

Particular $ Particular $
Begining Inventory      124,000 Sale    220,000
Purchases       78,000
Gross profit ( $220,000 *25%)         55,000 Ending Inventory        37,000
(Balancing Figure)
    Total     $257,000 Total       $257,000

Estimated value of inventory that was destroyed in the fire. = Ending Inventory - Salvage

                                                                                     = $37,000 - $10,000

                                                                                      = $27,000

Estimated value of inventory that was destroyed in the fire is $27,000.

ekkarill92 answered 2 years ago
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