The Accountant for a Company Whose Inventory Was Destroyed by Fire

question 14

Multiple Choice

The accountant for a company whose inventory was destroyed by fire determined from undamaged records that the cost of goods available for sale was $100,000 and the net sales were $80,000 up to the date of the fire.The accountant also determined that the company's normal gross profit rate is 40 percent of net sales.From this data,the accountant estimated the cost of the inventory destroyed by the fire to be

• A) $60,000.
• B) $52,000.
• C) $32,000.
• D) $20,000.

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Definitions:

Liabilities

Financial obligations or debts that an entity owes to other parties, which must be settled over time through the transfer of economic benefits.

Economic Events

Financial transactions or occurrences that affect a company's financial position, such as sales transactions, debt acquisitions, investments, etc.

Information System

A coordinated network of components designed to collect, process, store, and disseminate information to support decision-making, coordination, control, analysis, and visualization in an organization.

Interested Users

Individuals or entities with a vested interest in the financial and operational performance of a company, such as shareholders, creditors, and regulatory agencies.