Hat's accounting records showed the following:

Inventory, January1 $35,000

Purchases, January 1 through May 1 200,000

Sales, January 1 through May 1 250,000

Inventory not damaged by flood 30,000

Gross profit percentage on sales 40%

What amount of inventory was lost in the flood?

A. $150,000

B. $85,000

C. $105,000

D. $55,000

D. $55,000

Explanation:

Sales = 250,000

Gross Profit = 250,000 x 40% = 100,000

Cost of goods sold = 250,000 - 100,000 = 150,000

Cost of good sold = Opening Inventory + Purchases - Closing Inventory

150,000 = 35,000 + 200,000 - Closing Inventory

150,000 = 235,000 - Closing Inventory

Closing Inventory = 235,000 - 150,000

Closing Inventory = 85,000

Inventory damaged by flood = 85,000 - 30,000 = 55,000