Question

Howard's Supply Co. suffered a fire loss on April 20, 2021. The company's last physical inventory was taken January 30, 2021, at which time the inventory totaled $226,000. Sales from January 30 to April 20 were $606,000 and purchases during that time were $456,000. Howard's consistently reports a 30% gross profit. The estimated inventory loss is: Multiple Choice

Answer 1

Answer:

$257,800

Explanation:

According to the scenario, calculation of the given data are as follows,

Inventory on Jan. 30,2021 = $226,000

Sales = $606,000

Purchase = $456,000

Gross profit = 30% × $606,000 = $181,800

So, we can calculate the inventory loss by using following formula,

Inventory loss = COG for sale - COG sold

= ($226,000 + $456,000) - ($606,000 - $181,800)

= $682,000 - $424,200

= $257,800