Salvage Sales Ltd

question 118

Essay

Salvage Sales Ltd. suffered a loss of some inventory by fire on May 7. Cost of inventory on hand on January 1 was $100,000 and purchases between January 1 and May 7 amounted to $70,000 while freight-in and purchase returns, respectively, amounted to $6,000 and $4,000. Between January 1 and May 7 sales totalled $84,000. Goods which cost $24,500 were undamaged by the fire while the remainder of the inventory was destroyed. What was the approximate cost of the goods destroyed if: $\begin{array} { | l | l | } \hline \text { (a) Mark-up is } 25 \text { percent on cost? } & \$ \\\hline \text { (b) Mark-up is } 25 \text { percent on selling price? } & \$ \\\hline\end{array}$

---

Definitions:

Payor Bank

A bank that is responsible for paying the checks or drafts of the person or entity that holds an account with them.

Drawn

Refers to the process of creating or producing something, usually in the context of drafting legal documents or pulling a negotiable instrument like a check.

Endorsement

The act of publicly supporting or approving something, or a legal amendment to a document or agreement, often seen in insurance policies or bank checks.

Forged

Created, altered, or imitated with the intent to deceive; typically refers to documents, signatures, or art.