Question

Sheridan Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $34,960. Purchases since January 1 were $66,240; freight-in, $3,128; purchase returns and allowances, $2,208. Sales are made at 33 ¹/₃% above cost and totaled $102,000 to March 9. Goods costing $10,028 were left undamaged by the fire; remaining goods were destroyed.

1. 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

2. 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

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Sheridan
Workings for Answer 1	Amount $	Note
Sales	102,000.00	A
Mark up on cost	33%	B
Cost of goods sold	76,500.00	C=A/(1+B)
Answer 1	Amount $
Opening Inventory	34,960.00
Add:
Purchases	66,240.00
Freight in costs	3,128.00
Less: Purchases returns	2,208.00
Inventory available for sale	102,120.00
Less:
Cost of goods sold	76,500.00	See C
Undamaged goods	10,028.00
Cost of goods destroyed	15,592.00
Workings for Answer 2	Amount $	Note
Sales	102,000.00	D
Gross profit %	33%	E
Cost of goods sold	68,000.00	F=D*(1-E)
Answer 1	Amount $
Opening Inventory	34,960.00
Add:
Purchases	66,240.00
Freight in costs	3,128.00
Less: Purchases returns	2,208.00
Inventory available for sale	102,120.00
Less:
Cost of goods sold	68,000.00	See F
Undamaged goods	10,028.00
Cost of goods destroyed	24,092.00