A Accounting

Inventory destroyed by fire (video below)

On 1 September 20X8, a business had inventory of $95,000. During the month, sales totaled $162,500 and purchases $120,000. On 30 September 20X8 a fire destroyed some of the inventory. The undamaged goods in inventory were valued at $55,000. The business operates with a standard gross profit margin of 20%.

Based on this information, what is the cost of the inventory destroyed in the fire?

Answer

$
Sales (100%) 162,500
Cost of sales (80%) 130,000
Gross profit (20%) 32,500
Opening inventory 95,000
Purchases 120,000
215,000
Closing inventory (bal. fig.) (85,000)
Cost of sales 130,000
Calculated inventory 85,000
Actual inventory 55,000
Lost in fire 30,000


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