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.