On February 2, Year 2, a fire destroyed the entire inventory of Orange Co. The following information was found in accounting records: purchases of $420,000, sales of $690,000, beginning inventory of $120,000, and average gross margin percentage of 30%. Based on the above information, indicate whether each of the following statements is true or false.________ a)The cost of goods available for sale is $540,000.________ b)The cost of goods sold as a percent of sales is 70%.________ c)The estimated cost of goods sold is $303,000.________ d)Estimated inventory lost in the fire is $66,000.________ e)Estimated gross margin for the period up to the date of the fire was $483,000.

Question

Quizplus · Accepted Answer

b)True c)False d)False e)Fa)This is true. Cost of goods available for sale = Beginning inventory of $120,000 + Purchases of $420,000 = $540,000.b)This is true. If average gross margin percentage is 30%, cost of goods sold percentage is 100% − 30%, or 70%.c)This is false. Estimated cost of goods sold = Sales of $690,000 × Gross margin percentage of 70% = $483,000.d)This is false. Estimated ending inventory = Beginning inventory of $120,000 + Purchases of $420,000 − Estimated cost of goods sold of $483,000 = $57,000.e)This is false. Sales of $690,000 − Estimated cost of goods sold of $483,000 = $207,000.

On February 2, Year 2, a Fire Destroyed the Entire