The Accountant for a Company Whose Inventory Was Destroyed by Fire

question 45

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 $140,000 and the net sales were $100,000 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)$80,000.
• B)$60,000.
• C)$56,000.
• D)$84,000.

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Definitions:

Blame-free Environment

A work culture where individuals are encouraged to report mistakes without fear of punishment, facilitating open communication and continuous improvement.

Core Business

The primary area of activity within an organization that is central to its identity and typically generates the majority of its revenue.

Inattention

The lack of focus or concentration on a task or the present moment, which can lead to errors or oversights.

Deliberate Practice

A method of skill development involving focused, structured practice with the aim of improving performance.