Question

On April 15 of the current year, a fire destroyed the entire uninsured inventory of a retail store. The following data are available:Sales, January 1 through April 15 $480,000Inventory, January 1 80,000Purchases, January 1 through April 15 400,000Markup on cost 25%The amount of the inventory loss is estimated to be:a. $96,000.b. $48,000.c. $120,000.d. $80,000.

Answer 1

Answer:

The correct answer is C: 120,000

Explanation:

Giving the following information:

Sales, January 1 through April 15 $480,000

Inventory, January 1 80,000

Purchases, January 1 through April 15 400,000

Markup on cost 25%.

We need to find the difference between the cost of the lost inventory and what it will cost to purchase now.

Inventory= (Beginning inventory + purchase)*0.25=

Inventory= 480,000 * 0.25= 120,000