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Chapter 9: Question 14Q (page 474)

A fire destroys all of the merchandise of Assante Company on February 10, 2017. Presented below is information compiled up to the date of the fire. Inventory, January 1, 2017 $ 400,000 Sales revenue to February 10, 2017 1,950,000 Purchases to February 10, 2017 1,140,000 Freight-in to February 10, 2017 60,000 Rate of gross profit on selling price 40% What is the approximate inventory on February 10, 2017?

Short Answer

Expert verified

The inventory as of February 10, 2017, equals $430,000.

Step by step solution

01

Calculation of cost of goods sold

The cost of goods sold is calculated as follows:

CostofGoodsSold=SalesRevenue-Salesrevenue×Grossprofitrate=$1,950,000-1,950,000×40%=$1,170,000

02

Calculation of cost of goods available for sale

The cost of goods available for sale is calculated as follows:

Costofgoodsavailableforsale=BeginningInventory+Purchases+Freight-in=$400,000+$1,140,000+$60,000=$1,600,000

03

Calculation of inventory on February 10, 2017

The inventory on February 10, 2017, is calculated as follows:

InventoryonFebruary10,2017=Costofgoodsavailableforsale-Costofgoodssold=$1,600,000-$1,170,000=$430,000

Thus, the inventory on February 10, 2017, equals $430,000.

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Most popular questions from this chapter

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