Inventory Loss—Gross Profit Method On August 15, 2008, a hurricane damaged a warehouse of Rheinhart 1 answer below »

Inventory Loss—Gross Profit Method

On August 15, 2008, a hurricane damaged a warehouse of Rheinhart Merchandise Company. The entire inventory and many accounting records stored in the warehouse were completely destroyed. Although the inventory was not insured, a portion could be sold for scrap. Through the use of the remaining records, the following data are assembled:

Inventory, January 1                                                         

$ 375,000

Purchases, January 1–August 15                                                

1,385,000

Cash sales, January 1–August 15                                                

225,000

Collection of accounts receivable, January 1–August 15                               

2,115,000

Accounts receivable, January 1                                                  

175,000

Accounts receivable, August 15                                                 

265,000

Salvage value of inventory                                                    

5,000

Gross profit percentage on sales                                                 

32%

Compute the inventory loss as a result of the hurricane.

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