Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 45

Calculating Shrinkage and Gross Profit in a Perpetual System
Nord Store's perpetual accounting system indicated ending inventory of $20,000, cost of goods sold of $100,000, and net sales of $150,000. A year-end inventory count determined that goods costing $15,000 were actually on hand. Calculate (a) the cost of shrinkage, (b) an adjusted cost of goods sold (assuming shrinkage is charged to cost of goods sold), (c) grass profit percentage before shrinkage, and (d) gross profit percentage after shrinkage.