One of Wells Company€™s retail outlets was destroyed by fire on March 18. All merchandise was burned. The company has fire insurance on its merchandise inventory. It will therefore file a claim for recovery of the cost of the lost inventory. Clearly, a physical inventory cannot be taken because the inventory has been destroyed. The branch€™s records were kept by the home office, and you have been asked to examine the records to determine an estimate of the cost of the lost merchandise. As of March 18, the firm€™s records disclosed the following data about the beginning inventory for the year, the merchandise purchases made during the period, and total sales during the period:

INSTRUCTIONS
Determine the approximate cost of the inventory destroyed on March 18.
Analyze: Based on the cost you have computed for merchandise inventory, calculate the cost of goods sold for the period.

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Actual Cost Retall Sales Price Beginning inventory, January 1 Merchandise purchases, January 1-March 18 Freight on purchases Total sales, January 1–March 18 $ 58,800 165,250 $ 45,000 125,000 4,650 180,000