On 1 September 20X8, a business had inventory of $95,000. During the month, sales totaled $162,500 and purchases $120,000. On 30 September 20X8 a fire destroyed some of the inventory. The undamaged goods in inventory were valued at $55,000. The business operates with a standard gross profit margin of 20%.
Based on this information, what is the cost of the inventory destroyed in the fire?
Answer
| $ | |
| Sales (100%) | 162,500 |
| Cost of sales (80%) | 130,000 |
| Gross profit (20%) | 32,500 |
| Opening inventory | 95,000 |
| Purchases | 120,000 |
| 215,000 | |
| Closing inventory (bal. fig.) | (85,000) |
| Cost of sales | 130,000 |
| Calculated inventory | 85,000 |
| Actual inventory | 55,000 |
| Lost in fire | 30,000 |