A company's warehouse contents were destroyed by a flood on September 12.The following information was the only information that was salvaged: 1.Inventory,beginning: $28,000
2)Purchases for the period: $17,000
3)Sales for the period: $55,000
4)Sales returns for the period: $700
The company's average gross profit ratio is 35%.What is the estimated cost of the lost inventory?

Question

Quizplus · Accepted Answer

Explanation:Cost of goods sold = Beginning inventory + Purchases - Sales + Sales returns= 28,000 + 17,000 - 55,000 + 700= 9,700Estimated cost of lost inventory = Cost of goods sold / (1 - Gross profit ratio)= 9,700 / (1 - 0.35)= 9,700 / 0.65= $14,846.15

A Company's Warehouse Contents Were Destroyed by a Flood on September