Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Chapter 10, Problem 10.23BE
To determine
To identify: The gross profit percentage.
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Lily Company needs to determine the amount of inventory in its warehouse at the time that an earthquake destroyed
it. Lily's gross profit percentage averaged 27% over the last three years. Lily began the current year with inventory of
$840,000. Its net purchases were $4,387,000 and net sales were $3,970,000 during the year before the earthquake
occurred. Use the gross profit method to estimate the inventory on hand on the date of the earthquake.
Identify the appropriate formula and then calculate Lily's estimated ending inventory.
Estimated ending inventory
!!
On February 26, a hurricane destroyed the entire inventory stored in a warehouse owned by the Rockport Corporation. The following
information is available from the records of the company's periodic inventory system: beginning inventory, $315,000; purchases and
net sales from the beginning of the year through February 26, $590,000 and $790,000, respectively; gross profit ratio, 35%.
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
4
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, $305,000; purchases and net sales from the beginning of the year through February 26, $570,000 and $770,000, respectively; gross profit ratio, 25%.Estimate the cost of the inventory destroyed by the hurricane using the gross profit method.
Chapter 10 Solutions
Intermediate Accounting
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- 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.arrow_forwardThe 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 dollarsarrow_forwardThe 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 dollarsarrow_forward
- On 1st Jan 2006, a business had inventory of $19,000. During the month, sales totalled $32,500 and purchases $24,000. On 31st Jan 2006 a fire destroyed some of the inventory. The undamaged goods in inventory were valued at $11,000. The business operates with a standard gross profit margin of 30%. Based on this information, what is the cost of the inventory destroyed in the fire?arrow_forwardA 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.arrow_forwardOn 1st Nov 2020, a business had inventory of $380,000. During the month, sales totalled $650,000 and purchases $480,000. On 30th Nov 2020 a flood destroyed some of the inventory. The undamaged goods in inventory were valued at $220,000. The business operates with a standard gross profit margin of 25%.Based on this information, what is the cost of the inventory destroyed in the flood?arrow_forward
- Adams Corporation estimates that it lost $75,000 in inventory from a recent flood. The following information is available from the records of the company’s periodic inventory system: beginning inventory, $150,000; purchases and net sales from the beginning of the year through the date of the flood, $450,000 and $700,000, respectively. What is the company’s gross profit ratio? Gross profit ratio Choose Numerator: Choose Denominator: Gross profit ratio / = Gross profit ratio / =arrow_forwardA fire wiped out Plymouth Paper Company's Inventory. The insurance company will accept an estimate using the retail method Last year's balance sheet stated that the ending inventory was $13,000 and it would usually sell for $38,000 Mr Pichai knows that the cost of purchases was $160,000 and the retail selling prices for the paper totalled $297,000. Credit card receipts indicate that there was $238,000 of sales since the beginning of the year Calculate the cost of the lost ending inventory for the insurance company. (Round the retail ratio to two decimal places and the final answer to the nearest dollar.) The lost ending inventory is $arrow_forwardAdams Corporation estimates that it lost $187,200 in inventory from a recent flood. The following information is available from the records of the company's periodic inventory system: beginning inventory, $330,000; purchases and net sales from the beginning of the year through the date of the flood, $570,000 and $880,000, respectively. a. What is the company's gross profit ratio? b. What is the gross profit ratio?arrow_forward
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