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.