Question

Coastal Shores Inc. (CSI) was destroyed by Hurricane Fred on August 5, 2021. At January 1, CSI reported an inventory of $171,000. Sales from January 1, 2021, to August 5, 2021, totaled $481,000 and purchases totaled $196,000 during that time. CSI consistently marks up its products 65% over cost to arrive at a selling price. The estimated inventory loss due to Hurricane Fred would be: Multiple Choice $141,575. $75,485. $79,485.

Answer 1

Answer:

$75,485

Explanation:

The computation of the estimated inventory loss is shown below:

Goods lost = Cost of Goods available for sale - Cost of Goods Sold

where,

Cost of Goods available for sale = Inventory + Purchases

= $171,000 + 196,000

= $367,000

And,

Cost of Goods Sold is

= $481,000 ÷ 165%

= $291,515

So, the  estimated inventory loss  is

= $367,000 - $291,515

= $75,485