The inventory of Second Chance 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:

Gross margin for Second Chance has traditionally been 30 percent of sales.

Required

a. For the period ending October 6, compute the following:
(1) Estimated gross margin.
(2) Estimated cost of goods sold.
(3) Estimated inventory at October 6.

b. Assume that \(\$ 20,000\) of the inventory was not damaged. What is the amount of the loss from the tornado?

c. If Second Chance Grocery had used the perpetual inventory system, how would it have determined the amount of the inventory loss?

Transcribed Image Text:

Beginning inventory, January 1 Purchases through October 6 Sales through October 6 $ 162,000 680,000 1,140,000