The accountant for a company whose inventory was destroyed by fire determined from undamaged records that the cost of goods available for sale was $140,000 and the net sales were $100,000 up to the date of the fire. The accountant also determined that the company's normal gross profit rate is 40 percent of net sales. From this data, the accountant estimated the cost of the inventory destroyed by the fire to be

Question

Quizplus · Accepted Answer

The cost of goods sold is $100,000 x 60% = $60,000. The cost of the inventory destroyed by the fire is $140,000 - $60,000 = $80,000.

The Accountant for a Company Whose Inventory Was Destroyed by Fire