On September 22, 2021, a flood destroyed the entire merchandise inventory on hand in a warehouse owned by the Rocklin Sporting Goods Company. The following information is available from the records of the company's periodic inventory system: Inventory, January 1, 2021 Net purchases, January 1 through September 22 Net sales, January 1 through September 22 Gross profit ratio $147,000 377,000 585,000 254 Required: Complete the below table to estimate the cost of inventory destroyed in the flood using the gross profit method. Beginning inventory Plus: Net purchases Cost of goods available for sale Less: Cost of goods sold: Net sales Less: Estimated gross profit Estimated cost of goods sold Estimated cost of inventory destroyed 24
On September 22, 2021, a flood destroyed the entire merchandise inventory on hand in a warehouse owned by the Rocklin Sporting Goods Company. The following information is available from the records of the company's periodic inventory system: Inventory, January 1, 2021 Net purchases, January 1 through September 22 Net sales, January 1 through September 22 Gross profit ratio $147,000 377,000 585,000 254 Required: Complete the below table to estimate the cost of inventory destroyed in the flood using the gross profit method. Beginning inventory Plus: Net purchases Cost of goods available for sale Less: Cost of goods sold: Net sales Less: Estimated gross profit Estimated cost of goods sold Estimated cost of inventory destroyed 24
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:**Rocklin Sporting Goods Company Inventory Loss Estimation Due to Flood**
On September 22, 2021, a flood destroyed the entire merchandise inventory in a warehouse owned by the Rocklin Sporting Goods Company. The following data was available from the company's periodic inventory records:
- **Inventory, January 1, 2021:** $147,000
- **Net purchases, January 1 through September 22:** $377,000
- **Net sales, January 1 through September 22:** $585,000
- **Gross profit ratio:** 25%
**Calculation Requirement:**
The task is to estimate the cost of the inventory destroyed in the flood using the gross profit method. A table is provided to assist in this calculation, following these steps:
1. **Beginning inventory:** $147,000
2. **Plus: Net purchases:** $377,000
**Cost of goods available for sale:** Sum of beginning inventory and net purchases.
3. **Less: Cost of goods sold:**
- **Net sales:** $585,000
- **Less: Estimated gross profit (25% of net sales):** To calculate, multiply net sales by the gross profit ratio.
- **Estimated cost of goods sold:** Subtract estimated gross profit from net sales.
4. **Estimated cost of inventory destroyed:** Subtract the estimated cost of goods sold from the cost of goods available for sale.
The table provides a structured format to fill in these calculations and derive the estimated cost of inventory destroyed, highlighting important values with designated cell references and a yellow-colored section for the final estimated cost.
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