Question -
Part 1 - Gross Profit Method
King Co. requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $76,000. Purchases since January 1 were $144,000; freight-in, $6,800; purchase returns and allowances, $4,800. Sales are made at 25% above cost and totaled 200,000 to March 9. Goods costing $21,800 were left undamaged by the fire; remaining goods were destroyed.
Instructions
(a) Compute the cost of goods destroyed.
(b) Compute the cost of goods destroyed, assuming that the gross profit is 25% of sales.
Part 2 - Retail Inventory Method
Presented below is information related to Greene Company.
Cost Retail
Beginning Inventory $50,000 $70,000
Purchases 343,750 535,000
Markups 23,750
Markup cancellations 3,750
Markdowns 8,750
Markdown cancellations 1,250
Sales 550,000
Instructions - Compute the inventory by the conventional retail inventory method.