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*P6-10B O’Reilly Company lost all of its inventory in a fire on December 26, 2010. The

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*P6-10B O’Reilly Company lost all of its inventory in a fire on December 26, 2010. The
accounting records showed the following gross profit data for November and December.

December
November (to 12/26)
Net sales $600,000 $700,000
Beginning inventory 32,000 36,000
Purchases 377,000 424,000
Purchase returns and allowances 13,300 14,900
Purchase discounts 8,500 9,500
Freight-in 8,800 9,900
Ending inventory 36,000 ?

O’Reilly is fully insured for fire losses but must prepare a report for the insurance company.

Instructions

(a) Compute the gross profit rate for November.

(b) Using the gross profit rate for November, determine the estimated cost of the inventory lost
in the fire.

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