**Title: Estimating Inventory Loss Using the Gross Profit Method**Marigold Corporation's April 30 inventory was destroyed by fire. To estimate the loss, consider the following data:- **Initial Inventory (January 1):** $164,900- **Purchases (January through April):** $492,600- **Sales Revenue (January through April):** $686,300- **Normal Gross Profit Percentage on Sales:** 25%To determine the estimated inventory destroyed by the fire on April 30, apply the gross profit method.**Estimated Ending Inventory Destroyed in Fire:**__$ [Input Field]__**Explanation of Steps:**1. **Calculate Cost of Goods Available for Sale:** - Beginning Inventory + Purchases = Cost of Goods Available - $164,900 + $492,600 = $657,5002. **Estimate Cost of Goods Sold (COGS):** - Sales Revenue - (Sales Revenue x Gross Profit Percentage) = COGS - $686,300 - ($686,300 x 0.25) = $514,7253. **Estimate Ending Inventory:** - Cost of Goods Available - COGS = Ending Inventory - $657,500 - $514,725 = $142,775This calculated ending inventory represents the estimated inventory destroyed by the fire on April 30.

The inventory valuation method used to evaluate the closing inventory and cost of goods sold. In case of inventory destroyed by fire, we can get the value by the following formula Estimated ending inventory destroyed in fire = ( Begging inventory + Purchases ) - Cost of good sold Cost of goods sold = Sales * ( 1 Gross profit rate ) = 686,300 * ( 1- 25%) = 514,725 Estimated ending inventory destroyed in fire = ( 164,900 + 492,600 ) - 514,725 = $ 142,775

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Marigold Corporation's April 30 inventory was destroyed by fire. January 1 inventory was $164,900, and purchases for January through April totaled $492,600. Sales revenue for the same period was $686,300. Marigold's normal gross profit percentage is 25% on sales. Using the gross profit method, estimate Marigold's April 30 inventory that was destroyed by fire. Estimated ending inventory destroyed in fire %24

Marigold Corporation's April 30 inventory was destroyed by fire. January 1 inventory was $164,900, and purchases for January through April totaled $492,600. Sales revenue for the same period was $686,300. Marigold's normal gross profit percentage is 25% on sales. Using the gross profit method, estimate Marigold's April 30 inventory that was destroyed by fire. Estimated ending inventory destroyed in fire %24

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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