Tim Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $38,490. Purchases since January 1 were $93,260; freight-in, $4,700; purchase returns and allowances, $3,000. Sales are made at 33 1 / 3 % above cost and totaled $143,400 to March 9. Goods costing $12,120 were left undamaged by the fire; remaining goods were destroyed. (a) Compute the cost of goods destroyed. (b) Compute the cost of goods destroyed, assuming that the gross profit is 33 1 / 3 % of sales. (Round ratios for computational purposes to 5 decimal places, e.g. 78.72345% and final answer to 0 decimal places, e.g. 28,987.) Solution Cost of goods destroyed WN 1 Opening Stock (Mercandise) $       38,490 Add - Purchases $       93,260 Add - Freight (Direct) $         4,700 Less - Purchase returns / allowances $        -3,000 $   1,33,450 Less - Closing stock (Mar 9) $       12,120 Cost of goods $ 1,21,330 Cost of goods sold = WN 2 Sales $   1,43,400 Less : profit mark up @ 25% (33.333% on sales value) $ 35,850 Cost of sales $ 1,07,550 Cross check Cost of sales $ 1,07,550 Add - Gross Profit 33.3333% $       35,850 Sales value $ 1,43,400 Cost of goods destroyed: Cost of sales (WN2) $   1,07,550 Add - stock on March 9 $ 12,120 Total $   1,19,670 Less: Mercandise cost on Mar 9 (WN1) $   1,21,330 $ -1,660 .

1. Tim Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on
hand on January 1 was $38,490. Purchases since January 1 were $93,260; freight-in, $4,700;
purchase returns and allowances, $3,000. Sales are made at 33 1
/ 3 % above cost and totaled
$143,400 to March 9. Goods costing $12,120 were left undamaged by the fire; remaining goods
were destroyed.
(a) Compute the cost of goods destroyed.
(b) Compute the cost of goods destroyed, assuming that the gross profit is 33 1
/ 3 % of sales.
(Round ratios for computational purposes to 5 decimal places, e.g. 78.72345% and final
answer to 0 decimal places, e.g. 28,987.)
Solution
Cost of goods destroyed WN 1 Opening Stock (Mercandise) $ 38,490 Add - Purchases $
93,260 Add - Freight (Direct) $ 4,700 Less - Purchase returns / allowances $ -3,000 $
1,33,450 Less - Closing stock (Mar 9) $ 12,120 Cost of goods $ 1,21,330 Cost of goods sold
= WN 2 Sales $ 1,43,400 Less : profit mark up @ 25% (33.333% on sales value) $ 35,850 Cost
of sales $ 1,07,550 Cross check Cost of sales $ 1,07,550 Add - Gross Profit 33.3333% $
35,850 Sales value $ 1,43,400 Cost of goods destroyed: Cost of sales (WN2) $ 1,07,550 Add -
stock on March 9 $ 12,120 Total $ 1,19,670 Less: Mercandise cost on Mar 9 (WN1) $
1,21,330 $ -1,660