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The owner arrived early one morning at her place of business to find that her shop had been burglarized during the prior night
The owner arrived early one morning at her place of business to find that her shop had been burglarized during the prior night. Use the following information that the owner gathered to estimate the amount of inventory that was stolen. Normal gross margin rate 50% Beginning inventory, January 1 $50,000 Purchases to date, $199,000 Sales to date. $440,000 A. $19,000 B. $29,000 C. $39,000 D. $49,000
Expert Solution
Gross margin rate = 50%
Sales = $440,000
Gross margin = Sales x Gross margin rate
= 440,000 x 50%
= $220,000
Cost of goods sold = Sales - Gross margin
= 440,000 - 220,000
= $220,000
Cost of inventory stolen = Beginning inventory + Purchases - Cost of goods sold
= 50,000 + 199,000 - 220,000
= $29,000
Correct option is (B)
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