As a Result of Taking a Physical Inventory Count on December

question 126

Multiple Choice

As a result of taking a physical inventory count on December 31, 2016, the Mona Lisa Company inventory was determined to be $61,500. The auditors for Mona Lisa suspected an inventory shortage and used the gross profit method to estimate the ending inventory. The accounting records for the company contained the following information:
Using the gross profit method, what did the auditors estimate as the amount of the inventory that should have been on hand at December 31, 2016?

• A) $240,000
• B) $170,000
• C) $125,000
• D) $ 61,500

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Definitions:

Capital

Financial assets or the financial value of assets, such as cash and securities; also, factories, machinery, and equipment used to produce goods or services.

Production Outcomes

Production outcomes refer to the results of the production process, quantified in terms of quantity, quality, and efficiency of the goods or services produced.

Stocks

Stocks represent shares of ownership in a company, giving shareholders a claim on part of the company's assets and earnings.

Flows

In economics, movements of goods, services, capital, or money among different sectors or regions within an economy.