Question

An inventory taken the morning after a large theft discloses $60,000 of goods on hand as of

March 12. The following additional data is available from the books:

Inventory on hand, March 1                                                        $ 84,000

                Purchases received, March 1 – 11                                                63,000

                Sales (goods delivered to customers) 105,000

Past records indicate that sales are made at a 40% gross profit.

Estimate the inventory of goods on hand at the close of business on March 11 by the gross profit method a) $__________ and determine the amount of the theft loss b) $__________.

Answer 1

Beginning inventory = $84,000

Purchases from March 1 to 11 = $63,000

Sales of the period = 105,000

Gross profit percentage = 40%

Cost of goods sold = 105,000-40%

Cost of goods sold = $63,000

a. Inventory of Goods on hand at March 11 = Beginning inventory + purchases - cost of goods sold

= 84,000+63,000-63,000

Inventory of goods on hand at March 11 = $84,000

b. Inventory balance after the theft on Mrch 12 = $60,000

Theft loss = 84,000-60,000

Theft loss = $24,000