Determining gross profit method

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King Co. requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $76,000. Purchases since January 1 were $144,000; freight-in, $6,800; purchase returns and allowances, $4,800. Sales are made at 25% above cost and totaled 200,000 to March 9. Goods costing $21,800 were left undamaged by the fire; remaining goods were destroyed.

Instructions

(a) Compute the cost of goods destroyed.

(b) Compute the cost of goods destroyed, assuming that the gross profit is 25% of sales.

Reference no: EM13143202

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