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Answered Same DayOct 04, 2021

Answer To: https://connect.mheducation.com/connect/login/index.htm?logout=true&navclick=true&node=connect_app_8...

Rochak answered on Oct 04 2021
126 Votes
Question 1:
A fire destroyed a warehouse of the Goren Group, Inc., on May 4, 2021. Accounting records on that date indicated the following:
 
     
     
     
     
    Merchandise inventory, January 1,
2021
    $
    1,900,000
     
    Purchases to date
     
    5,800,000
     
    Freight-in
     
    400,000
     
    Sales to date
     
    8,200,000
     
    
The gross profit ratio has averaged 20% of sales for the past four years.
 
Required:
Use the gross profit method to estimate the cost of the inventory destroyed in the fire.
Answer:
Cost of goods sold = Sales – Gross profit
= $8,200,000 – ($8,200,000*20%)
= $6,560,000
Estimated Loss of fire = Cost of goods sold – (Beginning Inventory + Purchases + Freight)
= $6,560,000 – ($1,900,000 + $5,800,000 + $400,000)
= $1,540,000
Question 2:
San Lorenzo General Store uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the month of October 2021:
 
     
    Cost
    Retail
    Beginning inventory
    $
    35,000
     
    $
    50,000
     
    Net purchases
     
    19,120
     
     
    31,600
     
    Net markups
     
     
     
     
    1,200
     
    Net markdowns
     
     
     
     
    800
     
    Net sales
     
     
     
     
    32,000
     
    
Required:
Complete the table below to estimate the average cost of ending inventory and cost of goods sold for October using the information provided. (Round ratio calculation to 2 decimal places (i.e., 0.1234 should be entered as 12.34%.). Enter amounts to be deducted with a minus sign.)
Answer:
Cost to retail percentage = Cost of goods available for sale/Cost of goods available for sale Retail
= 54,120/82,000
= 66%
Net Sales = Beginning Inventory - Cost of goods available for sale Retail
= 50,000 – 82,000
= -32,000
Estimated ending inventory at cost = 33,000
Estimated cost of goods sold =...
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