Wekusko Ltd. (Wekusko) is a wholesaler of electronic equipment that it imports from Asia. Recently, the manager of Wekusko’s warehouse in Winnipeg became concerned that a significant amount of goods were being stolen from the warehouse. He wanted to know the extent of the problem so he could take remedial steps, if necessary. He spoke with the company accountant who told him that if he would count the inventory on hand she could give him an idea of how much inventory was being stolen.

The manager closed the warehouse and had the inventory counted. The warehouse manager advised the accountant there was $2,088,888 of inventory on hand on the date of the count. The manager also told the accountant that since the last year-end, goods costing $14,250 had been damaged and had to be thrown away. The accountant examined the financial records pertaining to the Winnipeg warehouse and found that since the last year-end, goods costing $1,750,000 had been purchased and stored in the warehouse and goods costing $2,248,400 had been shipped to customers. The inventory count at the end of the previous reporting period reported inventory of $2,775,800.

Required:

a. Estimate the amount of electronic equipment that might have been stolen from the Winnipeg warehouse.

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

(a) was due to theft? Explain.

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