Question

Problem 6-10A a-b Sheridan Company lost all of its inventory in a fire on December 26, 2020. The accounting records showed the following gross profit data for November and December. November December (to 12/26) Net sales $601,500 $710,000 Beginning inventory 30,000 38,000 Purchases 382,000 421,000 Purchase returns and allowances 13,000 14,900 Purchase discounts 8,500 9,500 Freight-in 8,400 10,800 Ending inventory 38,000 ? Sheridan is fully insured for fire losses but must prepare a report for the insurance company.

Compute the gross profit rate for November. Gross profit rate %

Using the gross profit rate for November, determine the estimated cost of the inventory lost in the fire. (Round answer to 0 decimal places, e.g. 125.) Estimated inventory lost in fire $

Answer 1

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Trading A/c of Sheridan Company for the month of November Particulars Amount Amount Particulars Opening Stock 30,000 Sales Purchases 3,82,000 Closing Stock Less: Returns And Allowances -13,000 Discounts -8,500 3,60,500 Freight in 8,400 Amount 6,01,500 38,000 Gross Profit(Balancing Fig.) Total 2,40,600 6,39,500 Total 6,39,500 Gross Profit Ratio = Gross Profit/Sales = 2,40,600/6,01,500 = 40.00%

Trading A/c of Sheridan Company for the month of November Particulars Amount Amount Particulars Opening Stock 30,000 Sales Purchases 3,82,000 Closing Stock Less: Returns And Allowances -13,000 Discounts -8,500 3,60,500 Freight in 8,400 Amount 6,01,500 38,000 Gross Profit(Balancing Fig.) Total 2,40,600 6,39,500 Total 6,39,500 Gross Profit Ratio = Gross Profit/Sales = 2,40,600/6,01,500 = 40.00%