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 $226,750. Inventory purchased during April (until the date of the tornado) was $197,800. Sales for the month of April through April 24 we're $642,500. Assuming the company's typical gross profit ratio is 50%, estimate the amount of inventory destroyed in the tornado

Answer 1

$103,300

Step-by-step explanation:

The computation of the amount of inventory destroyed is shown below:

Amount of inventory destroyed = Opening inventory + Purchases + Gross profit - Sales

where,

Opening inventory = $226,750

Purchase = $197,800

Gross profit is

= Sales × gross profit ratio

= $642,500 × 50%

= $321,250

And, the sales is $642,500

So, the amount of inventory destroyed is

= $226,750 + $197,800 + $321,250 - $642,500

= $103,300