[professorK]

On December 31, 2010 Brown Company's inventory burned. Sales and purchases for the year had been $1,400,000 and $980,000, respectively. The beginning inventory (Jan. 1, 2010) was $170,000; in the past Brown's gross profit has averaged 40% of selling price.

Instructions
Compute the estimated cost of inventory burned, and give entries as of December 31, 2010 to close merchandise accounts.

[professorK]

Cost of beginning inventory... $170,000
Purchases... 980,000
Ending Inventory... $1,150,000
Used inventory... 810,000
Ending Inventory.. . $340,000
Sales*40%... $560,000
Not sure where to go from here.

[rehmanvohra]

Cost of goods available for sale:
Beginning inventory $170,000
Purchases... .980,000
Total... $1,150,000

Less: Cost of goods sold:
Sales -----------------$1,400,000
Gross profit on sales... (560,000)
Cost of goods sold... $840,000

Ending inventory... $310,000