Question

On April 24 of the current year, The Memphis Pecan Company experienced a tornado that destroyed the company's entire inventory. At the beginning of April, the company reported beginning inventory of $228,350. Inventory purchased during April (until the date of the tornado) was $199,400. Sales for the month of April through April 24 were $644,100. Assuming the company's typical gross profit ratio is 50%, estimate the amount of inventory destroyed in the tornado.

Answer 1

Answer:

The amount of inventory destroyed in the tornado is $105,700

Explanation:

We know that,

Beginning inventory + purchase of inventory + Gross profit = Sales + ending inventory

$228,350 + $199,400 + $322,050 = $644,100 + ending inventory

$749,800  = $644,100 + ending inventory

So, the ending inventory equals to

= $749,800  - $644,100

= $105,700

The gross profit equals to

= Gross profit percentage × sales

= 50% × $644,100

= $322,050

The inventory is destroyed so we assume the ending inventory is destroyed which equal to $105,700