Inventory destroyed (video below)
On 31 December 20X2 the inventory of V was completely destroyed by fire. The following information is available:
- Inventory at 1 December 20X2 at cost $7,100
- Purchases for December 20X2 $12,400
- Sales for December 20X2 $16,200
- Standard gross profit percentage on sales revenue 25%
Based on this information, which of the following is the amount of inventory destroyed?
Answer
Margin = (sale –cost)/sale = 25% or
| $ | |
| Sales (100%) | 16,200 |
| Cost of sales (75%) | 12,150 |
| Gross profit (25%) | 4,050 |
| $ | |
| Opening inventory | 7,100 |
| Purchases | 12,400 |
| 19,500 | |
| Calculated closing inventory (bal fig) | (7,350) |
| Cost of sales | 12,150 |
| Calculated closing inventory | 7,350 |
| Actual closing inventory | – |
| Destroyed by fire | 7,350 |
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