A Company's Store Was Destroyed by an Earthquake on February

question 87

Essay

A company's store was destroyed by an earthquake on February 10 of the current year.The only information for the current period that could be salvaged included the following:
$$\begin{array} { | l | l | } \hline \text { Beginning inventory, January 1: } & \$ 44,000 \\\hline \text { Purchases to date: } & \$ 198,000 \\\hline \text { Sales to date: } & \$ 310,000 \\\hline\end{array}$$ Historically,the company's gross profit ratio has been 30%.Estimate the value of the destroyed inventory using the gross profit method.

---

Definitions:

Simple Interest

Interest calculated on the principal amount of a loan or investment, without compounding over time.

Yield

The income return on an investment, typically expressed as an annual percentage rate based on the investment’s cost, its current market value, or its face value.

Promissory Note

A financial instrument that contains a written promise by one party to pay another a definite sum of money either on demand or at a specified future date.

Commercial Paper

A short-term unsecured debt instrument issued by corporations, typically for financing accounts receivable and inventories.