Cougar Corp. requires an estimate of the cost of goods lost by fire on May 15th.
ID: 2555184 • Letter: C
Question
Cougar Corp. requires an estimate of the cost of goods lost by fire on May 15th. Merchandise on hand on January 1 was $41,000. Purchases since January 1 were $112,000. Freight paid on these inventory purchases is $5,100. The company also returned inventory that originally cost $3,400 (the retail price for the returned inventory is $5,800). Sales, which are made at 50% above cost, totaled $213,000 through May 15th. Goods costing $6,900 were left undamaged by the fire (the remaining goods were destroyed). Compute the cost of goods destroyed by the fire using the gross profit inventory method.
Explanation / Answer
January 1 inventory 41000 Add: Net Purchases 108600 =112000-3400 Freight paid 5100 Total goods available 154700 Less: Cost of goods sold 142000 =213000/150% Goods left undamaged 6900 Cost of goods destroyed 5800