I am trying to figure out the cost of merchandise destroyed on Feb. 7th given the following information:
Jan 1. Merchandise inventory $144,200
Jan. 1-Feb. 7 Purchases (net) 40,000
Jan. 1-Feb. 7 Sales (net) 70,000
Estimated gross profit rate: 40%
(gross profit rate=gross profit/net sales)
Can anyone help??
Sure! To calculate the cost of merchandise destroyed on February 7th, we need to find the cost of the merchandise sold during that period.
First, let's calculate the cost of goods sold (COGS) for the period from January 1st to February 7th using the given information.
1. Start with the beginning merchandise inventory on January 1st: $144,200.
2. Add the net purchases from January 1st to February 7th: $40,000.
3. Subtract the ending merchandise inventory on February 7th (which we need to calculate) from step 2.
4. This gives us the total cost of merchandise available for sale from January 1st to February 7th.
Now let's calculate the ending inventory on February 7th.
1. Calculate the total sales net revenue from January 1st to February 7th: $70,000.
2. Calculate the gross profit using the estimated gross profit rate of 40%: Gross Profit = Net Sales * Gross Profit Rate.
3. Calculate the cost of goods sold (COGS) as follows: COGS = net sales - gross profit.
4. Subtract the COGS calculated in step 3 from the total cost of merchandise available for sale to find the ending inventory.
Finally, to find the cost of merchandise destroyed on February 7th, compare the beginning inventory on January 1st to the ending inventory on February 7th.
Remember, the cost of goods destroyed is the difference between the cost of goods at the beginning and the end of the given period.
Hope this helps!