(Determine the amount of inventory shrinkage, LO 1) Magyar Ltd. (Magyar) is a large retail clothing store located in a suburban mall. Recently, the store manager became concerned that a significant amount of goods was being stolen from the store and she wanted an idea of how much was being stolen so that she could decide whether it was worthwhile to install theft-prevention equipment. The accountant told the store manager that if she would count the inventory on hand, the accountant could give her an idea of the amount of inventory being stolen.

The manager had the inventory counted after store closing one Sunday. According to the count there was $480,000 of inventory on hand. The manager also told the accountant that since the year end $42,000 of merchandise had been returned to suppliers. At the last year end Magyar had $420,000 of inventory. Since the year end the store had purchased $405,000 of inventory and had sales of $610,000. The gross margin that Magyar usually earns is 52%.

Required:

a. Determine the amount of electronic equipment that might have been stolen from the store.

b. Is it possible to conclude with certainty the amount you calculated in

(a) was due to theft?

c. Why was it necessary to count the inventory to estimate the amount of inventory that was stolen?

d. If Magyar had used a perpetual inventory system, would a count of the inventory have been required to provide the manager with the information she required?