Question

On March 15, a fire destroyed Oriole Company's entire retail inventory. The inventory on hand as of January 1 totaled $6900000. From January 1 through the time of the fire, the company made purchases of $3032000, incurred freight-in of $342000, and had sales of $5140000. Assuming the rate of gross profit to selling price is 30%, what is the approximate value of the inventory that was destroyed

Answer 1

Answer:

approximately $6,676,000

Explanation:

the value of the inventory that was destroyed by fire = beginning balance on January 1 + purchases made before the fire + freight costs - cost of goods sold

inventory destroyed by fire = $6,900,000 + $3,032,000 + $342,000 - ($5,140,000 x 70%) = $10,274,000 - $3,598,000 = $6,676,000