On November 21, 2016, a fire at Hodge Company\'s warehouse caused severe damage

Question

On November 21, 2016, 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 $12,000. The following information was available from the records of Hodge's periodic inventory system Inventory. November 1 Net purchases from November 1, to the $ 100,000 140,000 220,000 date of the fire it Net sales from November 1, to the date of the fire nt Based on recent history, Hodge's gross profit ratio on Product Tex is 35% of net sales. encesRequired: Calculate the estimated loss on the inventory from the fire, using the gross profit method re

Explanation / Answer

Calculate estimated loss on fire :

Beginning inventory 100000 Purchase 140000 Total goods available for sale 240000 Sale 220000 Gross profit (77000) Cost of goods sold (143000) Ending inventory on the date of fire 97000 Less: Net realizable value of damaged goods (12000) Esimated loss from fire 85000

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