Oriole Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $42,560. Purchases since January 1 were $80,640; freight-in, $3,808; purchase returns and allowances, $2,688. Sales are made at 33 1/3% above cost and totaled $129,000 to March 9. Goods costing $12,208 were left undamaged by the fire; remaining goods were destroyed. Collapse question part (a) Compute the cost of goods destroyed. (Round gross profit percentage and final answer to 0 decimal places, e. g. 15% or 125.) Cost of goods destroyed $

the cost of goods destroyed is $15,362

Explanation:

Note Sales are made at 33 1/3% above cost. Thus the Mark -up is 1/3.

Using the Mark-up and Margin Relationship :

Gross Profit Margin = 1/(3+1)

                                =1/4

Therefore gross profit = $129,000× 25%

                                     =  $32,250

Income Statement Using the Gross Profit Margin

Sales                                                                                 $129,000

Less Cost of Goods Sold

Opening Stock                                          $42,560

Add Purchases                   $80,640

Add Freight In                       $3,808

Less Returns                       ( $2,688)         $81,760

Available for Sale                                      $124,320        

Less Closing Stock                                    ($12,208)            

                                                                    $112,112

Less Goods destroyed                             ( $15,362)       (96,750)

Gross Profit                                                                       $32,250                                          

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