A fire destroyed the inventory of Barber Company. The following information is available:
Beginning inventory
$50,000
Purchases
$170,000
Net Sales Revenue
$200,000
Gross Profit Percentage
30%
Required:
1. Prepare a schedule to compute the amount of inventory lost in the fire using the gross profit method.
2. Prepare the required journal entry after the fire.
What will be an ideal response?
Answer:
1.
Beginning inventory
$50,000
Add: Purchases
170,000
Cost of Goods Available for Sale
220,000
Less: Cost of Goods Sold ($200,000 × 70%)
140,000
Ending Inventory
$80,000
2.
Account
Account
Debit
Credit
Loss on Inventory due to Fire
Inventory
80,000
80,000
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