Chapter 6, Problem 11ME

Calculating Shrinkage and Gross Profit in a Perpetual System

Nord Store’s perpetual accounting system indicated ending inventory of $20,000, cost of goods sold of $100,000, and net sales of $150,000. A year-end inventory count determined that goods costing $15,000 were actually on hand. Calculate (a) the cost of shrinkage, (b) an adjusted cost of goods sold (assuming shrinkage is charged to cost of goods sold), (c) gross profit percentage before shrinkage, and (d) gross profit percentage after shrinkage. Round gross profit percentages to one decimal place.