00:01
In this video, we're going to compute or estimate the cost of our inventory that was destroyed.
00:10
So in order to do that, we are given a gross profit rate data.
00:15
So we're going to use the gross profit method in this problem.
00:20
Now, the second requirement, we will describe the situations in which the gross profit method is useful.
00:26
So i will give you three situations.
00:31
Later so first things first let us all for our ending inventory since the merchandise was destroyed by fire on december 13 so it was almost year -end and we need to identify our ending balance the ending balance in our inventory because that was what actually destroyed that was destroyed by fire so to so for your ending inventory, that is equivalent to your beginning inventory or the beginning balance of your inventory.
01:15
You add your purchases and that is equivalent to the total goods available for sale.
01:32
And subtract your cost of goods sold.
01:40
And we will get our ending.
01:44
Inventory balance.
01:49
So let us fill in these data.
01:55
So we have a beginning inventory of 350 ,000.
02:03
We add our purchases in the amount of 2 ,950 ,000...