Question

Question 8 On December 31, 2021 Crane Company's inventory burned. Sales and purchases for the year had been $1,470,000 and $977,000, respectively. The beginning inventory (Jan. 1, 2021) was $171,000; in the past Crane's gross profit has averaged 30% of selling price. Compute the estimated cost of inventory burned. Estimated cost of inventory burned $

Give entries as of December 31, 2021 to close merchandise accounts. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

(1)

Cost of goods sold = Sales - gross profit

= $1470000 - ($1470000 x 30%)

= $1029000

and,

cost of goods sold = beginning inventory + purchases - ending inventory

therefore,

Ending inventory = $171000 + $977000 - 1029000

= $119000

therefore, estimated cost of inventory burned = $119000

(2)

Date	account title	debit	credit
	Cost of goods sold Loss of inventory Inventory Purchases	$1029000 $119000 . .	. . $171000 $977000