Question

Howard Supply Co suffered a fire loss on April 20,2011. The companys last physical inventory was taken on January 30,2011 at which time the inventory totaled 220,000. Sales from Jan 30 to April 20 were $600,000 and purchases during that time were $450,000. Howards consistently reports a 30% gross profit. The estimated inventory loss is:

a 490,000
b 238,000
c 250,000
d none

Answer 1

C.$250,000

Step-by-step explanation:

Beginning inventory $220,000

Add Net purchases $450,000

Goods available for sale $670,000

Less: Cost of goods sold:

Net sales $600,000

Less: Estimated gross profit($180,000)

Estimated cost of goods sold(420,000)

Estimated ending inventory

($670,000-$420,000)$250,000

Therefore the estimated inventory is $250,000