Question

Crane Company lost all of its inventory in a fire on December 28, 2021. The accounting records showed the following gross profit data for November and December:

		November			December (to Dec. 28)
Sales		$674,000			$964,000
Sales Returns and Allowances		16,000			24,000
Purchases		439,000			621,000
Purchase returns and allowances		18,000			21,000
Freight in		7,200			13,000
Beginning inventory		35,000			39,400
Ending inventory		39,400			?

Crane is fully insured for fire losses but must prepare a report for the insurance company.

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Calculate gross profit for the month of November.

Gross profit

$

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Calculate the gross profit margin percentage for November. (Round gross profit margin to 1 decimal place, e.g. 52.7%.)

Gross profit margin

$

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Determine the amount of inventory lost by Crane Company as a result of the fire using the gross profit method. (Round gross profit margin to 1 decimal place, e.g. 52.7% and final answer to 0 decimal places, e.g. 5,275.)

Inventory lost by Crane

$

Answer 1

1.

Sales	$ 674,000
Less: Sales Returns and Allowances	$ (16,000)
Net Sales		$ 658,000
Less: Cost of goods sold\
Beginning inventory	$   35,000
Add:Purchases	$ 439,000
Less:Purchase returns and allowances	$ (18,000)
Add: Freight in	$     7,200
Less: Ending inventory	$ (39,400)
Cost of goods sold		$   423,800
Gross Profit		$   234,200

2.

Gross profit % = $234,200/$658,000

Gross profit % = 35.6%

3.

Sales	$   964,000
Less: Sales Returns and Allowances	$   (24,000)
Net Sales		$    940,000
Less: Gross profit ($940,000*35.6%)		$ (334,640)
Cost of goods sold		$    605,360

Beginning inventory	$    39,400
Add:Purchases	$ 621,000
Less:Purchase returns and allowances	$   (21,000)
Add: Freight in	$    13,000
Less: Cost of goods sold	$ (605,360)
Loss due to fire	$       47,040

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