Answer To: https://connect.mheducation.com/connect/login/index.htm?logout=true&navclick=true&node=connect_app_8...
Rochak answered on Oct 04 2021
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 =...