Hat's accounting records showed the following: Inventory, January 1 $35,000 Purchases, January 1...

Question:

Hat's accounting records showed the following:

Inventory, January 1 $35,000
Purchases, January 1 through May 1 200,000
Sales, January 1 through May 1 250,000
Inventory not damaged by flood 30,000
Gross profit percentage on sales 40%

What amount of inventory was lost in the flood?

a. $55,000

b. $85,000

c. $150,000

d. $105,000

Cost of Goods Sold:

The cost of the goods sold is used to calculate the gross income. The formula of the gross can be the total net sales less total cost of goods sold. It Is also helps in calculate net income.

Answer and Explanation:

Particular Amount $ Amount $
Beginning balance 35,000
Add: Purchase 200,000
Less: Ending Inventory
Inventory not damaged by flood 30,000
Inventory damaged by flood (balance) 55,000 85,000
Cost of Goods Sold (100%-40%) 150,000 (60% x 250,000)

Hence option A is correct.


Learn more about this topic:

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How to Calculate Gross Profit Margin: Definition & Formula

from Financial Accounting: Help and Review

Chapter 5 / Lesson 17
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