Homework SourseTony Legler requires an estimate of the cost of goods lost b
Tony Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $38,200. Purchases since January 1 were $73,800; freight-in, $3,300; purchase returns and allowances, $2,200. Sales are made at 33 1/3% above cost and totaled $96,800 to March 9. Goods costing $11,900 were left undamaged by the fire; remaining goods were destroyed
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Solution
Sales = Cost + 33 1/3% of cost
96,800 = Cost + 1/3rd of Cost
96,800 = 4/3 of Cost
Cost of goods sold = 96,800×3/4 = $72,600
Gross profit = 33 1/3% of sales = 1/3rd of sales = 1/3×96,800 = $32,267
Cost of goods sold = Sales - Gross profit = 96,800-32,267 = $64,533
| Beginning merchandise | $38,200 |
| Purchase | 73,800 |
| Freight in | 3,300 |
| Less: Purchase returns and allowances | (2,200) |
| Cost of goods available for sale | 113,100 |
| Less: Cost of goods sold | (72,600) |
| Ending merchandise on March 9 | 40,500 |
| Less: Good undamaged | (11,900) |
| Cost of goods destroyed | $28,600 |
