On November 21, 2013, a fire at Hodge Company’s warehouse caused severe damage t
ID: 2380396 • Letter: O
Question
On November 21, 2013, a fire at Hodge Company’s warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable damaged goods can be sold for $19,000. The following information was available from the records of Hodge’s periodic inventory system:
On November 21, 2013, a fire at Hodge Company’s warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable damaged goods can be sold for $19,000. The following information was available from the records of Hodge’s periodic inventory system:
nventory, November 1 $ 135,000 Net purchases from November 1, to the date of the fire 147,000 Net sales from November 1, to the date of the fire 227,000
Based on recent history, Hodge
Explanation / Answer
ANSWER: $126,800
227,000 * (100%-40%) = 136,200 = COGS
Beg. Inv. = $135,000
+Purchases = $147,000
-COGS = $136,200
=End. Inv. = $145,800
-sellable inventory = $19,000
=Estimated Loss = $126,800
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