Howard's Supply Co. suffered a fire loss on April 20, 2021. The company's last physical inventory was taken January 30, 2021, at which time the inventory totaled $220,000. Sales from January 30 to April 20 were $600,000 and purchases during that time were $450,000. Howard's consistently reports a 30% gross profit. The estimated inventory loss is:_______. (do not include $ or , in your answer)
A. $490,000.
B. $238,000.
C. $250,000.
D. None of these answer choices are correct.

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abdulmajeedabiodunac abdulmajeedabiodunac · Answer 1 · 2020-12-07T01:40:35+01:00

Answer:

C. $250,000

Explanation:

Cost of goods sold=Sales -gross profit

Sales revenue=$600,000

Gross profit=sales revenue*gross profit %=$600,000*30%=$180,000

Cost of goods sold=$600,000-$180,000=$420,000

Cost of goods available for sale=Beginning inventory+purchases

beginning inventory=$220,000

purchases=$450,000

Cost of goods available for sale=$220,000+$450,000=$670,000

Lost inventory=cost of goods available-cost of goods sold

lost inventory=$670,000-$420,000=$250,000