Question

Alan Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $38,600. Purchases since January 1 were $65,700; freight-in, $3,300; purchase returns and allowances, $2,200. Sales are made at 33 ¹/₃% above cost and totaled $99,900 to March 9. Goods costing $10,000 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. Computation of cost of goods destroyed

Particulars	Amount( in $)
Sales	99000
Cost of goods sold (Total Sales - Gross Profit)	74250 (99000-24750(i.e., 33.33% on cost means 25% on sales(99000*25%))
Cost of goods available for sale (Beginning balance+Purchases+Freight-purchase returns and allowances)	105400 (38600+65700+3300-2200)
Cost of goods available for sale after march 9 sale (Cost of goods available for sale-cost of goods sold)	31150 (105400-74250)
Cost of goods destroyed (Cost of goods available on march 9 after sale-cost of undamaged goods)	21150 (31150-10000)

2. Computation of cost of goods destroyed when gross profit is 33.33% on sales.

Particulars	Amount( in $)
Sales	99000
Cost of goods sold (Total Sales - Gross Profit)	66000 (99000-33000(i.e., 33.33% on sales(99000*33.33%))
Cost of goods available for sale (Beginning balance+Purchases+Freight-purchase returns and allowances)	105400 (38600+65700+3300-2200)
Cost of goods available for sale after march 9 sale (Cost of goods available for sale-cost of goods sold)	39400 (105400-66000)
Cost of goods destroyed (Cost of goods available on march 9 after sale-cost of undamaged goods)	29400 (39400-10000)