What the estimated merchandise destroyed by the flood was

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Reference no: EM132915548

On May 6, 2018, a flash flood caused damage to the merchandise stored in the warehouse of Cabanatuan Company. You were asked to submit an estimate of the merchandise destroyed in the warehouse. The following data were established:

  • Net sales for 2017 were P800,000, matched against cost of P560,000.
  • Merchandise inventory January 1, 2018 was P200,000, 90% of which was in the warehouse and 10% in downtown showrooms.
  • From January 1, 2018 to the date of flood, you ascertained invoice value of purchases (all stored in the warehouse) to be P100,000; freight inward, P4,000; and purchase returned, P6,000.
  • Cost of merchandise transferred from the warehouse to the showrooms was P8,000 and net sales from January to May 6 2018 (all warehouse stock) were P320,000.

Problem 1: Assuming gross profit rate in 2018 to be the same as in the previous year, the estimated merchandise destroyed by the flood was,

A. 46,000

B. 50,000

C. 66,000

D. 80,000

Reference no: EM132915548

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