CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Every-Day Clothing had a November 1 merchandise inventory balance of $45,000. It made purchases of $80,000 and recorded sales of $130,000 during November. Its estimated gross profit on sales was 25%. On November 30, the store was destroyed by fire. What was the value of the merchandise inventory loss?
A. $27,500
B. $125,000
C. $97,500
Explanation: The cost of goods sold is equal to sales less the gross profit on sales, or $97,500 ($130,000 x (1 - 0.25)). The lost inventory will be estimated as inventory available at cost less the cost of goods sold.

User Contributed Comments 2

User Comment
murli Cost of Goods sold to be considered for Inventory.
chamad (1)Inventory @cost= 45k+80k=125000
(2)COGS = 97500
(1)-(2)=27500
You need to log in first to add your comment.