Estimate the inventory loss

Assignment Help Accounting Basics

Reference no: EM131002073

Dexall Company recently had a fire in its store. Management must determine the inventory loss for the insurance company. Since the firm did not have perpetual inventory records, the insurance company has suggested that it might accept an estimate using the gross profit test. The beginning inventory, as deter- mined from the last financial statements, was $10,000. Purchase invoices indicate purchases of $100,000. Credit and cash sales during the period were $120,000. Last year, the gross profit for the firm was 40%, which was also the industry average.

Required:

a. Based on these data, estimate the inventory loss.

b. If the industry average gross profit was 50%, why might the insurance company be leery of the estimated loss?

Reference no: EM131002073

Questions Cloud

Overall best practices in organizational leadership : Develop narration for each of the slides. Use the speaker's notes section of the slides to indicate what you would say if you were actually presenting in front of an audience.

What is it like to live with schizophrenia : What is it like to live with schizophrenia? Legal scholar and writer Elyn Saks has suffered from this devastating illness for many years and is a strong advocate for the rights of mentally ill people. Please listen to her talk and address the fo..

What the most surprising thing you learned about happiness : Questions: What is the most surprising thing you learned about happiness from Dr. Gilbert's talk? Can you think of some ways to apply what you learned from the talk to your own life

Evaluate potential grand strategies for the organization : Recommend a strategy or combination of strategies the organization should implement, and include a rationale for that recommendation.

Estimate the inventory loss : Based on these data, estimate the inventory loss. If the industry average gross profit was 50%, why might the insurance company be leery of the estimated loss?

Assume all net income earned : Prepare the shareholders' equity section of TNL Systems' balance sheet at December 31, 2013, comparing the two approaches. Assume all net income earned in 2011-2013 was distributed to shareholders as cash dividends.

Presentation about piaget theory of cognitive development : A presentation about Piaget's Theory of cognitive development. In Psychology major. You have to do a presentation about Piaget's Theory of cognitive development

Financial data for squid company : Selected financial data for Squid Company are as follows:

Multi-employer pension plans : a. What were the contributions to multiemployer pension plans for 2006, 2005, and 2004? Comment on the trend. b. Determine the total liability for multiemployer pension plans at the end of 2006. c. What control does Safeway, Inc., have over multiempl..

User Account

All Pages