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 $45,600. Purchases since January 1 were $86,400; freight-in, $4,080; purchase returns and allowances, $2,880. Sales are made at 33 1/3% above cost and totaled $141,000 to March 9. Goods costing $13,080 were left undamaged by the fire; remaining goods were destroyed.

a) Compute the cost of goods destroyed.

b) Compute the cost of goods destroyed, assuming that the gross profit is 33 1/3% of sales.

please show All work. Thank you!

Answer 1

Cost of Goods Destroyed (a) Particulars Amount Merchandise Balance on Jan 1 Purchases Freight-in Purchase Returns & Allowances 45,600 Add. Add. 86,400 4,080 Less. 2,880 Total 1,33,200 Goods Left undamaged Sales of Goods - coGS = 141000*3/4 Cost of Goods Lost by Fire Less. 13,080 Sales are made at 33 1/3% over cost Cost Less -141000*3/4 1,05,750 1,05,750 Gross Profit 105750*33.33% 14,370 35,250 Total Sales 1,41,000 Cost of Goods Destroyed (b) Particulars Amount Merchandise Balance on Jan 1 Purchases Freight-in Purchase Returns & Allowances 45,600 86,400 Add. Add. 4,080 Less. 2,880 Total 1,33,200 Goods Left undamaged Sales of Goods - COGS - 141000*2/3 Less. 13,080 GP is 33 1/3% of sale - 141000*2/3 Gross Profit-141000*33.33% Less 94,000 Cost 94,000 Cost of Goods Lost by Fire 26,120 47,000 Total Sales 1,41,000