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On November 21, 2021, a fire at Hodge Companys warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable
On November 21, 2021, a fire at Hodge Companys warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable damaged goods can be sold for $30,000. The following information was available from the records of Hodges periodic inventory system:
Inventory, November 1 | $ | 190,000 | |
Net purchases from November 1, to the date of the fire | 158,000 | ||
Net sales from November 1, to the date of the fire | 238,000 | ||
Based on recent history, Hodges gross profit ratio on Product Tex is 40% of net sales. Required: Calculate the estimated loss on the inventory from the fire, using the gross profit method.
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