Estimating Inventory Values Before Fire Disaster

What were the inventory amounts immediately preceding the fire?

Submit your estimate of the inventory amounts immediately preceding the fire:

Lumber $__________

Millwork $__________

Hardware $__________

Estimate of Inventory Amounts Before Fire

The estimated inventory values immediately preceding the fire are $159,200 for Lumber, $45,240 for Millwork, and $28,260 for Hardware. These estimates are calculated using the gross profit rates and the information from the general ledger.

Explanation

To estimate the inventory values immediately preceding the fire, we can follow these steps:

First, we'll calculate the cost of goods sold (COGS) for each merchandise line. This is given by Sales divided by 1 + the gross profit rate. For example, for Lumber, COGS = Sales / (1 + 0.25) = $2,064,500 / 1.25 = $1,651,600.

Then, we calculate the ending inventory. This is given by the beginning Inventory + Purchases - COGS. For example, for Lumber, Ending Inventory = $265,900 + $1,544,900 - $1,651,600 = $159,200.

Performing these calculations for all three merchandise lines, we get:

• Lumber: $159,200
• Millwork: $45,240
• Hardware: $28,260