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%
Estimated merchandise inventory destroyed:
To estimate the merchandise inventory destroyed, we can use the gross profit method. The gross profit method estimates the cost of goods sold (COGS) by multiplying the net sales by the gross profit rate. Then, we can calculate the estimated merchandise inventory by subtracting the estimated COGS from the cost of goods available for sale.
First, let's calculate the estimated COGS:
Net sales (Jan. 1 - Feb. 7) = $70,000
Gross profit rate = 40%
Estimated COGS = Net sales * Gross profit rate
Estimated COGS = $70,000 * 40% = $28,000
Next, let's calculate the cost of goods available for sale:
Cost of goods available for sale = Beginning inventory + Purchases
Cost of goods available for sale = $144,200 + $40,000 = $184,200
Now, we can calculate the estimated merchandise inventory destroyed:
Estimated merchandise inventory destroyed = Cost of goods available for sale - Estimated COGS
Estimated merchandise inventory destroyed = $184,200 - $28,000 = $156,200
Therefore, the estimated merchandise inventory destroyed is $156,200.