A fire destroyed the warehouse of Reed Enterprises, on August 31, 20Y1. The books and records of Reed showed the following information on that date. Merchandise Inventory. Jan. 1, 20Y1 $600,000 Purchases to date 990,000 Freight - In 30,000 Sales to date $2,400,000The gross profit ratio has averaged 60 % of sales for the past six years. Required: Use the gross profit method to estimate the cost of inventory destroyed by fire. Group of answer choices $660,000 $1,590,000 $1,620,000 $960,000
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Merchandise Inventory. Jan. 1, 20Y1 | $600,000 |
Purchases to date | 990,000 |
Freight - In | 30,000 |
Sales to date | $2,400,000 |
Required:
Use the gross profit method to estimate the cost of inventory destroyed by fire.
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- A fire destroyed a warehouse of the Goren Group, Inc., on May 4, 2021. Accounting records on that date indicated the following: Merchandise inventory, January 1, 2021 $1,900,000Purchases to date 5,800,000Freight-in 400,000Sales to date 8,200,000 The gross profit ratio has averaged 20% of sales for the past four years.Required:Use the gross profit method to estimate the cost of the inventory destroyed in the fire.A fire destroyed a warehouse of the Goren Group, Incorporated, on May 4, 2024. Accounting records on that date indicated the following: Merchandise inventory, January 1, 2024 Purchases to date Freight-in Sales to date $ 1,940,000 5,840,000 Estimated loss from fire 440,000 8,600,000 The gross profit ratio has averaged 20% of sales for the past four years. Required: Use the gross profit method to estimate the cost of the inventory destroyed in the fire.The inventory of Swifty Company was destroyed by fire on March 1. From an examination of the accounting records, the following data for the first 2 months of the year are obtained: Sales Revenue $53,000, Sales Returns and Allowances $1,000, Purchases $34,000, Freight-In $1,300, and Purchase Returns and Allowances $1,500.Determine the merchandise lost by fire, assuming: A beginning inventory of $20,000 and a gross profit rate of 32% on net sales. Estimated cost of merchandise lost $enter the Estimated cost of merchandise lost in dollars A beginning inventory of $31,000 and a gross profit rate of 41% on net sales. Estimated cost of merchandise lost $enter the Estimated cost of merchandise lost in dollars
- The inventory of Swifty Company was destroyed by fire on March 1. From an examination of the accounting records, the following data for the first 2 months of the year are obtained: Sales Revenue $53,000, Sales Returns and Allowances $1,000, Purchases $34,000, Freight-In $1,300, and Purchase Returns and Allowances $1,500.Determine the merchandise lost by fire, assuming: A beginning inventory of $20,000 and a gross profit rate of 32% on net sales. Estimated cost of merchandise lost $enter the Estimated cost of merchandise lost in dollars1. Assume that the following was extracted from Massy’s accounting information system for operations at this outlet for the week, up to the time of the fire. Sales $830,00 Purchases Returns $56,000Purchases $580,000 Beginning Inventory $160,000Sales Returns $42,000The company’s gross profit percent based on net selling price is 40%. Merchandise with a selling price of $60,000 remainded undamaged after the fire. Some smoke damaged merchandise has a residual value of $18,200.The company is in the process of estimating its fire loss on inventory using the gross profit method, for insurance purposes. Required:Prepare a detailed schedule to compute the estimated fire loss incurred on inventoryOn February 7 of the following year,the merchandise inventory was destroyed by fire based on the following data obtained from the accounting records,estimate the cost of the merchandise destroyed: Jan 1 merchandise inventory 140,600 Jan 1-Feb 7 purchase (net) 38,000 Jan 1-Feb sales (net)........68,000 Estimated gross profit rate ....40%
- Assume that the following was extracted from Massy’s accounting information system foroperations at this outlet for the week, up to the time of the fire.$ $Sales 830,000 Purchases Returns 56,000Purchases 580,000 Beginning Inventory 160,000Sales Returns 42,000The company’s gross profit percent based on net selling price is 40%. Merchandise with aselling price of $60,000 remainded undamaged after the fire. Some smoke damagedmerchandise has a residual value of $18,200.The company is in the process of estimating its fire loss on inventory using the gross profitmethod, for insurance purposes.On April 15 of the current year, a fire destroyed the entire uninsured inventory of a retail store. The following data are available: Sales, January 1 through April 15 $573000 Inventory, January 1 91000 Purchases, January 1 through April 15 477500 20% Markup on cost The amount of the inventory loss is estimated to be • $91000. O $109200. O $95500. O $45500.On February 26 a hurricane destroyed the entire inventory stored in a warehouse owned by the Rockford Corporation. The following information is available from the records of the company’s periodic inventory system: beginning inventory, $220,000; purchases and net sales from the beginning of the year through February 26, $400,000 and $600,000, respectively; gross profit ratio, 30%. Estimate the cost of the inventory destroyed by the hurricane using the gross profit method. Beginning inventory Plus: Net purchases Cost of goods available for sale Less: Cost of goods sold: Net sales Less: Estimated gross profit Estimated cost of goods sold Estimated cost of inventory destroyed
- Assume that the following was extracted from Massy’s accounting information system foroperations at this outlet for the week, up to the time of the fire.Sales 830,000 Purchases 580,000 Sales Returns 42,000 Purchases Returns 56,000 Beginning Inventory 160,000 The company’s gross profit percent based on net selling price is 40%. Merchandise with aselling price of $60,000 remained undamaged after the fire. Some smoke damaged merchandisehad a residual value of $18,200. The company is in the process of estimating its fire loss on inventory using the gross profitmethod, for insurance purposes. Required:Prepare a detailed schedule to compute the estimated fire loss incurred on inventory.Assume that the following was extracted from Massy’s accounting information system for operations at this outlet for the week, up to the time of the fire.$ $Sales 830,000 Purchases Returns 56,000Purchases 580,000 Beginning Inventory 160,000Sales Returns 42,000 The company’s gross profit percent based on net selling price is 40%. Merchandise with a selling price of $60,000 remainded undamaged after the fire. Some smoke damaged merchandise has a residual value of $18,200. The company is in the process of estimating its fire loss on inventory using the gross profit method, for insurance purposes. Required: Prepare a detailed schedule to compute the estimated fire loss incurred on inventory.The merchandise inventory was destroyed by fire on December 13. The following data were obtained from the accounting records: Merchandise inventory $ 350,000 Jan. 1 Jan. 1-Dec. 31 Purchases (net) 2,950,000 Sales 4,440,000 Estimated gross profit rate 35% a. Estimate the cost of the merchandise destroyed. b. Briefly describe the situations in which the gross profit method is useful.