Question

Pharoah Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $34,200. Purchases since January 1 were $64,800; freight-in, $3,060; purchase returns and allowances, $2,160. Sales are made at 33 1/3% above cost and totaled $99,000 to March 9. Goods costing $9,810 were left undamaged by the fire; remaining goods were destroyed.

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

$

Compute the cost of goods destroyed, assuming that the gross profit is 33 ¹/₃% of sales. (Round ratios for computational purposes to 5 decimal places, e.g. 78.72345% and final answer to 0 decimal places, e.g. 28,987.)

Cost of goods destroyed

$

Answer 1

1
Gross Profit ratio	25.00%		=33.33333/133.33333
Beginning inventory		34200
Add: Purchases		64800
Add: Freight-in		3060
Less: Purchase returns and allowances		-2160
Cost of goods available		99900
Sales revenue	99000
Less: Gross profit	24750		=99000*25%
Cost of goods sold		74250
Estimated ending inventory		25650
Less: Goods on hand—undamaged (at cost)		9810
Cost of goods destroyed		15840
2
Gross Profit ratio	33.33333%
Beginning inventory		34200
Add: Purchases		64800
Add: Freight-in		3060
Less: Purchase returns and allowances		-2160
Cost of goods available		99900
Sales revenue	99000
Less: Gross profit	33000		=99000*33.33333%
Cost of goods sold		66000
Estimated ending inventory		33900
Less: Goods on hand—undamaged (at cost)		9810
Cost of goods destroyed		24090