On March 15, a fire destroyed Sheridan Company's entire retail inventory. The inventory on hand as of January 1 totaled $5900000. From January 1 through the time of the fire, the company made purchases of $2032000, incurred freight-in of $242000, and had sales of $4140000. Assuming the rate of gross profit to selling price is 20%, what is the approximate value of the inventory that was destroyed

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Zviko Zviko · Answer 1 · 2020-08-07T02:47:29+02:00

Answer:

the approximate value of the inventory that was destroyed is $4,862,000.

Explanation:

Use the Gross Profit percentage to find the value of the inventory that was destroyed.

Sales $4,140,000

Less Cost of Goods Sold

Opening Inventory $5,900,000

Add Purchases $2,032,000

Add Freight In $242,000

Available $8,174,000

Less Inventory Lost ($4,862,000)

Cost of Sales (3,312,000)

Gross Profit at 20% $828,000

Conclusion :

The Value of inventory that was destroyed is $4,862,000.