Riverbottom Liquidators was wiped out by a recent flood when all its inventory was observed floating down the river.On the day after the flood,management filed an insurance claim on the inventory that was totally destroyed.From records maintained elsewhere it was established:
Sales revenue (to date this period)$700 000
Beginning inventory $ 90 000
Purchases (so far this period)$600 000
Historical gross profit percentage 60%
Assuming the historical gross profit was maintained during the current period what was the cost of inventory lost in the flood?

Question

Quizplus · Accepted Answer

Cost of goods sold = Sales revenue x (1 - Gross profit percentage)= $700,000 x (1 - 60%)= $700,000 x 0.40= $280,000Cost of inventory lost = Beginning inventory + Purchases - Cost of goods sold= $90,000 + $600,000 - $280,000= $410,000

Riverbottom Liquidators Was Wiped Out by a Recent Flood When