Cost of the inventory destroyed (video below)
On 30 September 20X3 part of the inventory of a company was completely destroyed by fire.
The following information is available:
– Inventory at 1 September 20X3 at cost $12,450
– Purchases for September 20X3 $22,150
– Sales for September 20X3 $32,500
– Inventory at 30 September 20X3 – undamaged items $8,000
– Standard gross profit percentage on sales 25%
Based on this information, what is the cost of the inventory destroyed?
Answer
| $ | |
| Theoretical gross profit ($32,500 x 25%) | 8,125 |
| Actual gross profit ($32,500 – ($12,450 + $22,150 – $8,000)) | 5,900 |
| Shortfall-missing inventory | 2,225 |