Value of the inventory lost (video below)

A fire on 30 September 20X4 destroyed some of a company’s inventory and its inventory records.

The following information is available:

$

Inventory 1 September 20X4                                               79,500

Sales for September 20X4                                                    153,000

Purchases for September 20X4                                           103,000

Inventory in good condition at 30 September 20X4         53,500

Standard gross profit percentage on sales is 35%

Based on this information, what is the value of the inventory lost?

Answer

Margin = (sale –cost)/sale = 35% ,so cost = sale x 65%

$

Opening inventory                                        79,500

Purchases                                                        103,000

Closing inventory                                           (53,500)

Cost of sale                                                      129,000

Notional cost of sales (153,000 x 65%)       (99,450)

Inventory lost                                                29,550

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