INTERMEDIATE ACCOUNTING
3rd Edition
ISBN: 9780136946694
Author: GORDON
Publisher: RENT PEARS
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Chapter 10, Problem 10.23BE
To determine
To identify: The gross profit percentage.
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Lily Company needs to determine the amount of inventory in its warehouse at the time that an earthquake destroyed
it. Lily's gross profit percentage averaged 27% over the last three years. Lily began the current year with inventory of
$840,000. Its net purchases were $4,387,000 and net sales were $3,970,000 during the year before the earthquake
occurred. Use the gross profit method to estimate the inventory on hand on the date of the earthquake.
Identify the appropriate formula and then calculate Lily's estimated ending inventory.
Estimated ending inventory
!!
On February 26, a hurricane destroyed the entire inventory stored in a warehouse owned by the Rockport Corporation. The following
information is available from the records of the company's periodic inventory system: beginning inventory, $315,000; purchases and
net sales from the beginning of the year through February 26, $590,000 and $790,000, respectively; gross profit ratio, 35%.
Estimate the cost of the inventory destroyed by the hurricane 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
4
On February 26, a hurricane destroyed the entire inventory stored in a warehouse owned by the Rockford Corporation. The following information is available from the records of the company’s periodic inventory system: beginning inventory, $305,000; purchases and net sales from the beginning of the year through February 26, $570,000 and $770,000, respectively; gross profit ratio, 25%.Estimate the cost of the inventory destroyed by the hurricane using the gross profit method.
Chapter 10 Solutions
INTERMEDIATE ACCOUNTING
Ch. 10 - How is inventory tracked under a perpetual...Ch. 10 - Barbara Wight is Chief Financial Officer at Taylor...Ch. 10 - What costs should be included in the unit cost of...Ch. 10 - When does the inventory allocation problem arise?Ch. 10 - Explain the difference between the FIFO method of...Ch. 10 - Which method of inventory results in an inventory...Ch. 10 - If unit costs are rising and inventory levels are...Ch. 10 - How can financial statements be converted from the...Ch. 10 - Explain the unit of measure under the dollar-value...Ch. 10 - What do firms use as the market value when...
Ch. 10 - Do U.S. GAAP and IFRS treat inventory write-downs...Ch. 10 - Under IFRS, how do firms determine...Ch. 10 - How does the conventional retail method...Ch. 10 - Why would a company use the gross profit method to...Ch. 10 - How are required LIFO disclosures used to compute...Ch. 10 - How does a company build LIFO layers under the...Ch. 10 - Giddens Company adopted the dollar-value UFO...Ch. 10 - The Loyd Company lad 150 units of product Omega on...Ch. 10 - Simmons, Inc. uses the lower-of-cost-or-market...Ch. 10 - Simmons, Inc. uses the lower-of-cost-or-market...Ch. 10 - The Loyd Company had 150 units of product Omega on...Ch. 10 - The Loyd Company had 150 units of product Omega on...Ch. 10 - On March 1, Year 1, LuxWear me had beginning...Ch. 10 - Prob. 10.1BECh. 10 - Prob. 10.2BECh. 10 - Prob. 10.3BECh. 10 - Prob. 10.4BECh. 10 - FIFO, Perpetual Basis. Spider incorporated...Ch. 10 - LIFO, Perpetual Basis. Using the information...Ch. 10 - Prob. 10.7BECh. 10 - LIFO Reserve. Best Stores is considering a change...Ch. 10 - LIFO. Perpetual Basis. Source Enterprises reports...Ch. 10 - LIFO Liquidation. Using the information provided...Ch. 10 - Prob. 10.11BECh. 10 - Dollar-Value LIFO, Conversion to FIFO. Using the...Ch. 10 - Lower of Cost or Market. Count Clothing Company...Ch. 10 - Lower of Cost or Market. Using the information in...Ch. 10 - Lower of Cost or Market, IFRS. Using the...Ch. 10 - Prob. 10.16BECh. 10 - Prob. 10.17BECh. 10 - Lower of Cost or Market. Sarat Boot Company...Ch. 10 - Prob. 10.19BECh. 10 - Prob. 10.20BECh. 10 - Prob. 10.21BECh. 10 - Gross Profit Method. Sammi Company needs to...Ch. 10 - Prob. 10.23BECh. 10 - LIFO Retail Inventory Method. Complete the...Ch. 10 - LIFO Retail Inventory Method. Complete the...Ch. 10 - Moving Average, FIFO, LIFO. Arthur Lloyd...Ch. 10 - Moving Average, FIFO, LIFO, Presentation, and...Ch. 10 - Moving Average, FIFO, LIFO. Zoola, Inc. provided...Ch. 10 - Prob. 10.4ECh. 10 - LIFO, Conversion to FIFO. Inventory transactions...Ch. 10 - LIFO. Burke Company uses the LIFO perpetual method...Ch. 10 - Prob. 10.7ECh. 10 - Prob. 10.8ECh. 10 - Prob. 10.9ECh. 10 - Prob. 10.10ECh. 10 - Lower of Cost or Market. All-Kinds-of-Cases...Ch. 10 - Prob. 10.12ECh. 10 - Lower of Cost or Market. Printmaster Distributors...Ch. 10 - Prob. 10.14ECh. 10 - Prob. 10.15ECh. 10 - Conventional Retail Inventory Method. Melvin...Ch. 10 - Gross Profit Method. A tsunami destroyed Kyoto...Ch. 10 - Prob. 10.18ECh. 10 - Prob. 10.19ECh. 10 - Prob. 10.20ECh. 10 - Dollar-Value LIFO Retail Inventory Method....Ch. 10 - Moving Average, FIFO, LIFO. Morocco Imports...Ch. 10 - Prob. 10.2PCh. 10 - Prob. 10.3PCh. 10 - Prob. 10.4PCh. 10 - Prob. 10.5PCh. 10 - Prob. 10.6PCh. 10 - Dollar-Value LIFO. LIFO Liquidation. Silvio's...Ch. 10 - Lower of Cost or Market. Framingdale Factories....Ch. 10 - Lower of Cost or Market. O'Sullivan Corporation...Ch. 10 - Conventional Retail Inventory Method. John Stevens...Ch. 10 - Prob. 10.11PCh. 10 - Prob. 10.12PCh. 10 - Basic Retail Inventory Method and Conventional...Ch. 10 - Basic Retail Inventory Method and Conventional...Ch. 10 - Prob. 10.15PCh. 10 - Conventional Retail Inventory Method, Lower of...Ch. 10 - Prob. 1JCCh. 10 - Judgment Case 2: Inventory Costing BBS is a...Ch. 10 - Prob. 3JCCh. 10 - Prob. 1FSCCh. 10 - Prob. 2FSCCh. 10 - Prob. 1SSCCh. 10 - Prob. 2SSCCh. 10 - Surfing the Standards Case 3: Time Shares Treasure...Ch. 10 - Surfing the Standards Case 4: Lower of Cost or...Ch. 10 - Prob. 1BCCCh. 10 - Basis for Conclusions Case 2: The Lower of Cost or...
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- On February 26, a hurricane destroyed the entire inventory stored in a warehouse owned by the Rockford Corporation. The following information is available from the records of the company’s periodic inventory system: beginning inventory, $220,000; purchases and net sales from the beginning of the year through February 26, $400,000 and $600,000, respectively; gross profit ratio, 30%. Estimate the cost of the inventory destroyed by the hurricane using the gross profit method.arrow_forwardOn 1st Jan 2006, a business had inventory of $19,000. During the month, sales totalled $32,500 and purchases $24,000. On 31st Jan 2006 a fire destroyed some of the inventory. The undamaged goods in inventory were valued at $11,000. The business operates with a standard gross profit margin of 30%. Based on this information, what is the cost of the inventory destroyed in the fire?arrow_forwardA fire destroyed a warehouse of the Goren Group, Inc., on May 4, 2021. Accounting records on that date indicated the following: Merchandise inventory, January 1, 2021 $1,900,000Purchases to date 5,800,000Freight-in 400,000Sales to date 8,200,000 The gross profit ratio has averaged 20% of sales for the past four years.Required:Use the gross profit method to estimate the cost of the inventory destroyed in the fire.arrow_forward
- Adams Corporation estimates that it lost $75,000 in inventory from a recent flood. The following information is available from the records of the company’s periodic inventory system: beginning inventory, $150,000; purchases and net sales from the beginning of the year through the date of the flood, $450,000 and $700,000, respectively. What is the company’s gross profit ratio? Gross profit ratio Choose Numerator: Choose Denominator: Gross profit ratio / = Gross profit ratio / =arrow_forwardOn 1st Nov 2020, a business had inventory of $380,000. During the month, sales totalled $650,000 and purchases $480,000. On 30th Nov 2020 a flood destroyed some of the inventory. The undamaged goods in inventory were valued at $220,000. The business operates with a standard gross profit margin of 25%.Based on this information, what is the cost of the inventory destroyed in the flood?arrow_forwardA fire wiped out Plymouth Paper Company's Inventory. The insurance company will accept an estimate using the retail method Last year's balance sheet stated that the ending inventory was $13,000 and it would usually sell for $38,000 Mr Pichai knows that the cost of purchases was $160,000 and the retail selling prices for the paper totalled $297,000. Credit card receipts indicate that there was $238,000 of sales since the beginning of the year Calculate the cost of the lost ending inventory for the insurance company. (Round the retail ratio to two decimal places and the final answer to the nearest dollar.) The lost ending inventory is $arrow_forward
- Over the past 3 years, the gross profit rate for Jini Company was 42%. Last week a fire destroyed all Jini’s inventory. Beginning inventory $ 6,350 Net purchases 64,700 Net sales at retail 49,700 Using the gross profit method, estimate the cost of inventory destroyed in the fire, given the above facts that were recorded in a fireproof safe. inventory destroyed?arrow_forwardOn January 1, a store had inventory of $48,000. January purchases were $46,000 and January sales were $95,000. On February 1 a fire destroyed most of the inventory. The rate of gross profit was 20% of sales. Merchandise with a selling price of $5,000 remained undamaged after the fire. Compute the amount of the fire loss, assuming the store had no insurance coverage. Label all figures.arrow_forwardOn November 21, 2024, a fire at Hodge Company's warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable damaged goods can be sold for $15,000. The following information was available from the records of Hodge's periodic inventory system: Inventory, November 1, 2024 Net purchases from November 1, to the date of the fire Net sales from November 1, to the date of the fire Based on recent history, Hodge's gross profit ratio on Product Tex is 40% of net sales. $ 115,000 143,000 223,000 Required: Calculate the estimated loss on the inventory from the fire, using the gross profit method. Estimated loss from firearrow_forward
- Adams Corporation estimates that it lost $187,200 in inventory from a recent flood. The following information is available from the records of the company's periodic inventory system: beginning inventory, $330,000; purchases and net sales from the beginning of the year through the date of the flood, $570,000 and $880,000, respectively. a. What is the company's gross profit ratio? b. What is the gross profit ratio?arrow_forwardY Wholesale Company began the year with merchandise inventory of $9,000. During the year, Y purchased $97,000 of goods and returned $6,300 due to damage. Y also paid freight charges of $1,200 on inventory purchases. At year-end, Y's ending merchandise inventory balance stood at $17,400. Assume that Y uses the periodic inventory system. Compute Y's cost of goods sold for the year.arrow_forwardYoung Company, a camera store, lost some inventory in a fire on December 15. To file an insurance claim, the company must estimate its December 15 inventory using the gross profit method. For the past two years, Young Company's gross profit has averaged 45% of net sales. Its inventory records reveal the following data: (Click the icon to view the data.) Read the requirements. Requirement 1. Estimate the cost of the lost inventory using the gross profit method. Add: Less: Net purchases Estimated cost of goods sold: Less: Estimated cost of goods sold Estimated cost of ending inventory lost Data table Inventory, December 1 Transactions December 1-15: Purchases Purchases discounts Purchase returns Sales Print Done $ 57,500 490,000 19,000 70,600 663,000 X Requirements 1. Estimate the cost of the lost inventory using the gross profit method. 2. Prepare the income statement for December 1 to December 15 for this product through gross profit. Show the detailed computations of cost of goods…arrow_forward
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