Question

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The inventory of Don’s Grocery was destroyed by a tornado on October 6 of the current year. Fortunately, some of the accounting records were at the home of one of the owners and were not damaged. The following information was available for the period of January 1 through October 6:

Beginning inventory, January 1	$	70,900
Purchases through October 6		377,000
Sales through October 6		514,500

Gross margin for Don’s has traditionally been 30 percent of sales.

b. Assume that $9,300 of the inventory was not damaged. What is the amount of the loss from the tornado?

Answer 1

Estimated gross margin (514,500*30%)		154,350
Estimated cost of goods sold (514,500-154350)		360,150
Estimated inventory at October 6
Beginning inventory		70,900
Add : purchases		377,000
Cost of goods sold available for sale		447,900
Less : cost of goods sold		360,150
Ending inventory		87,750
Less : undamaged inventory		9,300
Total loss		78,450