The inventory of Don’s Grocery was destroyed by a tornado on October 6 of the current year. Fortunately, some of the accounting records were at the home of one of the owners and were not damaged. The following information was available for the period of January 1 through October 6:

The inventory of Don’s Grocery was destroyed by a tornado on October 6 of the current year.

Fortunately, some of the accounting records were at the home of one of the owners and were
not damaged. The following information was available for the period of January 1 through
October 6:

 


  Beginning inventory, January 1     $     66,100    
  Purchases through October 6           367,000    
  Sales through October 6           457,000    

 

Gross margin for Don’s has traditionally been 25 percent of sales.
Required:
a.     For the period ending October 6, compute the following:

Explanation:

a.
1.

Estimated gross margin:

Sales × Gross margin %: $457,000 × 0.25 = $114,250

2.

Estimated cost of goods sold:

Sales – Gross margin: $457,000 – $114,250 = $342,750

Or:

Sales × Cost of goods sold %: $457,000 × 0.75 = $342,750

3.

Estimated inventory at October 6:
Beginning inventory	$ 66,100
Plus: Purchases	367,000
Goods available for sale	$ 433,100
Less: Cost of goods sold	(342,750)
Ending inventory	$   90,350

b.     Assume that $11,600 of the inventory was not damaged. What is the amount of the loss from the tornado?

Explanation:

Loss: Total inventory	$	90,350
Less: Undamaged		(11,600	)
Total loss	$	78,750

Thank you!