Gross Profit Method A fire completely destroyed all the inventory of Glisan Lumber Yard on August...

 

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Gross Profit Method A fire completely destroyed all the inventory of Glisan Lumber Yard on August 5, 20- Fortunately, the accounting records were not destroyed in the fire. The following information is provided by Glisan Lumber Yard for the time period January 1 through August 5: Beginning inventory, January 1, 20-- $105,000 Net purchases, January 1 through August 5 424,000 Net sales, January 1 through August 5 734,000 Normal gross profit as a percentage of sales 45% Required: Estimate the amount of merchandise inventory destroyed in the fire on August 5 using the gross profit method. 198,700 X Check My W Use the firm's normal gross profit as a percentage of net sales to estimate cost of goods sold and ending inventory in three steps: 1. Compute the cost of goods available for sale. 2. Estimate cost of goods sold by deducting the normal gross profit (net sales X normal gross profit as percentage of net sales) from net sales 3. Estimate the ending inventory by deducting cost of goods sold from the cost of goods available for sale. Gross Profit Method A fire completely destroyed all the inventory of Glisan Lumber Yard on August 5, 20- Fortunately, the accounting records were not destroyed in the fire. The following information is provided by Glisan Lumber Yard for the time period January 1 through August 5: Beginning inventory, January 1, 20-- $105,000 Net purchases, January 1 through August 5 424,000 Net sales, January 1 through August 5 734,000 Normal gross profit as a percentage of sales 45% Required: Estimate the amount of merchandise inventory destroyed in the fire on August 5 using the gross profit method. 198,700 X Check My W Use the firm's normal gross profit as a percentage of net sales to estimate cost of goods sold and ending inventory in three steps: 1. Compute the cost of goods available for sale. 2. Estimate cost of goods sold by deducting the normal gross profit (net sales X normal gross profit as percentage of net sales) from net sales 3. Estimate the ending inventory by deducting cost of goods sold from the cost of goods available for sale.

Answer rating: 100% (QA)

Answer 1 Compute the cost of goods available for sale Beginning ... View the full answer