ronaldo antiques, inc., began july with inventory of $49,300. the business made net purchases of $62,300 and…

ronaldo antiques, inc., began july with inventory of $49,300. the business made net purchases of $62,300 and had net sales of $83,100 before a fire destroyed the companys inventory. for the past several years, ronaldos gross profit percentage has been 35%.\n\nestimate the cost of the inventory destroyed using the gross profit method.\n\nbeginning inventory\nestimated gross profit of 35%\nnet purchases\nnet sales revenue\ntotal expenses\n\nrequirement\n1. estimate the cost of the inventory destroyed by the fire. identify another reason that owners and managers use the gross profit method to estimate inventory.

ronaldo antiques, inc., began july with inventory of $49,300. the business made net purchases of $62,300 and had net sales of $83,100 before a fire destroyed the companys inventory. for the past several years, ronaldos gross profit percentage has been 35%.\n\nestimate the cost of the inventory destroyed using the gross profit method.\n\nbeginning inventory\nestimated gross profit of 35%\nnet purchases\nnet sales revenue\ntotal expenses\n\nrequirement\n1. estimate the cost of the inventory destroyed by the fire. identify another reason that owners and managers use the gross profit method to estimate inventory.

Answer

Explanation:

Step1: Calculate cost of goods available for sale

Cost of goods available for sale = Beginning inventory + Net purchases Cost of goods available for sale = $49,300 + $62,300 = $111,600

Step2: Calculate cost of goods sold percentage

Cost of goods sold percentage = 1 - Gross - profit percentage Cost of goods sold percentage = 1 - 0.35 = 0.65

Step3: Calculate estimated cost of goods sold

Estimated cost of goods sold = Net sales × Cost of goods sold percentage Estimated cost of goods sold = $83,100×0.65 = $54,015

Step4: Calculate cost of inventory destroyed

Cost of inventory destroyed = Cost of goods available for sale - Estimated cost of goods sold Cost of inventory destroyed = $111,600 - $54,015 = $57,585

Another reason owners and managers use the gross - profit method to estimate inventory is for interim financial reporting when a physical inventory count is not feasible.

Answer:

The cost of the inventory destroyed is $57,585. Another reason for using the gross - profit method is for interim financial reporting when a physical count is not possible.