A companys warehouse contents were destroyed by a flood on S

A company\'s warehouse contents were destroyed by a flood on September 12. The following information was the only information that was salveged 1 Inventory, beginning: $29,200 2 Purchases for the period: $18,200 3. Sales for the period: $56,200 4 Sales returns for the period: $820 The company\'s average gross profit ratio is 28% what is the estimated cost of the lost inventory?

Solution

For determining cost of inventory lost we have to first know how much material be have at the beginning and how much material is purchased during the period and we deduct the cost of goods sold for the period.

Working note

Cost of goods sold=A-B=39873.60

Particulars	amount
Inventory at beginning of period(x)	29200
Add: purchase during the period(y)	18200
Less:cost of goods sold during period(working note)(z)	39873.60
Cost of inventory lost(x+y-z)	7526.40