On November 21, 2016, a fire at Hodge Company’s warehouse caused severe damage t

Question

On November 21, 2016, a fire at Hodge Company’s warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable damaged goods can be sold for $16,000. The following information was available from the records of Hodge’s periodic inventory system:

Calculate the estimated loss on the inventory from the fire, using the gross profit method.

Estimated lost from fire:

Inventory Nov. 1 120000 Net pruchases from Nov 1, to the date of the fire 144000 Net sale from Nov 1, to the date of the fire 224000

Explanation / Answer

Calculation of cost of inventory sold:

Net sale                                                          224000

Less: Gross Profit @ 30%                               67200

cost of inventory sold:                                   =$156800

Calculation Of Cost of lost inventory due to fire:

Opening stock                                                          120000

Add: Net purchase to the date of fire                       144000

Less: cost of inventory sold:                                    156800

Cost of lost inventory due to fire:                       = $107200

Estimated loss on the inventory from the fire:

=Cost of lost inventory due to fire - Realised Value from damaged goods

= 107200 - 16000

=$91200

                             

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.