Question

Carla Vista Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $36,480. Purchases since January 1 were $69,120; freight-in, $3,264; purchase returns and allowances, $2,304. Sales are made at 33 1/3% above cost and totaled $108,000 to March 9. Goods costing $10,464 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

a)

If Sales are made at 33.33% above cost and totaled $108,000, then COGS:

COGS = $108,000 / 1.333333 = $81,000

Now, COGS = Opening Stock + Purchases - Purchase returns + Freight – Closing Stock

$81,000 = $36,480 + $69,120 - $2,304 + $3,264 – Closing Stock

Closing Stock = $25,560

$10,464 were undamaged so the remaining $15,096 is the cost of goods destroyed.

b)

If gross profit is 33.33% of sales then gross profit:

GP = $108,000 * 33.33333% = $36,000

COGS = $108,000 - $36,000 = $72,000

Now, COGS = Opening Stock + Purchases - Purchase returns + Freight – Closing Stock

$72,000 = $36,480 + $69,120 - $2,304 + $3,264 – Closing Stock

Closing Stock = $34,560

$10,464 were undamaged so the remaining $24,096 is the cost of goods destroyed.

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