Project 2 ACC 550

# Project 2 ACC 550 - AC550Project2 Part1GrossProfitMethod

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AC 550 Project 2 Part 1 Gross Profit Method Horton, Inc. suffered an inventory loss due to a flood. The following information is available to you. Beginning inventory  \$100,000 Net purchase  \$400,000 Sales  \$400,000 Inventory salvaged from flood  \$50,000 Instructions Use the gross profit method for estimating inventory to determine the loss due to the flood, assuming  (a)  gross  profit is 25% of sales, and  (b)  gross profit is 25% of the cost of goods sold. Part (a) Gross Profit Method Calculation Assumption: Gross Profit is 25% of Sales Beginning inventory  \$100,000 Add: Net purchase(s)  \$400,000 Cost of Goods Available for Sale \$500,000 Sub: Cost of Goods Sold \$300,000 (\$400,000 * 75%) Ending Inventory \$200,000 Sub: Salvaged Inventory \$50,000 Inventory Lost to Flood \$150,000 Part (b) Gross Profit Method Calculation Assumption: Gross Profit is 25% of Cost of Goods Sold Beginning inventory

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## This note was uploaded on 03/01/2012 for the course ACCOUTNING 550 taught by Professor Abner during the Spring '11 term at DeVry Houston.

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Project 2 ACC 550 - AC550Project2 Part1GrossProfitMethod

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