When Mary Potts arrived at her store on the morning of January 29, she found emp

Question

When Mary Potts arrived at her store on the morning of January 29, she found empty shelves and display racks; thieves had broken in during the night and stolen the entire inventory. Accounting records showed that Potts had inventory costing $52,000 on January 1 From January 1 to January 29, Potts had made net sales of $72,800 and net purchases of $83,200. The gross profit during the past several years had consistently averaged 40 percent of net sales. Potts plans to file an insurance claim for the theft loss. a. Using the gross profit method, estimate the cost of inventory at the time of the theft. Estimated ending inventory

Explanation / Answer

To beginning inventory 52000 By net sales 72800 To net purchases 83200 By estimated ending inventory(balance) $91520. To gross profit(0.4*72800) $29120 Total $164320 Total $164320

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