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Question - XYZ Branch of the ABC Company is billed for merchandise by the home office at 20% above cost. The branch in turn prices merchandise for sales purposes at 25% above billed price. On February 14, all of the branch merchandise is destroyed by fire. No insurance was maintained. Branch accounts showed the following information:
Merchandise inventory, January 1 (at billed price), P26,400
Shipments from home office (Jan 1- Feb 14), P20,000
Sales, P15,000
Sales returns, P2,000
Sales allowances, P1,000
Required - What was the cost of merchandise destroyed by fire?
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