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Compute the inventory lost during the theft

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Reference no: EM132884002

Problem - Gross Profit Method: Estimation of Theft Loss - You are requested by a client on September 28 to prepare an insurance claim for a theft loss that occurred on that day. You immediately take an inventory and obtain the following data:

Inventory, September 1 $38,000

Sales, September 1-September 28 $51,000

Purchases, September 1-September 28 19,000

The inventory on September 28 indicates that an inventory of $15,000 remains after the theft. During the past year, net sales were made at 50% above the cost of goods sold.

Required -

1. Compute the inventory lost during the theft. Round the gross profit percentage to 3 decimal places.

2. What concerns might you have about the inventory estimation under the gross profit method?

Reference no: EM132884002

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