On May 6, 2020 a flash flood caused damage to the merchandise stored in the warehouse of

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Question:

On May 6, 2020 a flash flood caused damage to the merchandise stored in the warehouse of Cebu Co. you were asked to submit an estimate of the merchandise destroyed in the warehouse. The following data were established:

•Net sales for 2019 were P1,600,000, matched against cost of P1,120,000.

•Merchandise inventory, January 1, 2020 was P400,000, 90% of which was in the warehouse and 10% in downtown showrooms.

• For January 1, 2020, you ascertained invoice value of purchases (all stores in the warehouse), P200,000; freight inward, P8,000; purchases returned. P12,000.

•Cost of merchandise transferred from the warehouse to showrooms was P16,000, and net sales from January 1 to May 6, 2020 (all warehouse stock) were P640,000.

Assuming gross profit rate in 2020 to be the same as in the previous year.

The estimated merchandise destroyed by the flood was:

a. 100,000

b. 108,000

c. 88,000

d. 92,000