Callahan Computers Stores Its Inventory in a Warehouse That Burned

question 156

Multiple Choice

Callahan Computers stores its inventory in a warehouse that burned to the ground in late November,2012.Their sales office was at a different location.In order to file a claim with their insurance,the owners ask you to estimate the inventory in the warehouse.The following information is available: $$\begin{array} { | l | r |} \hline \text { Beginning inventory } & \$ 375,500 \\\hline \text { Purchases through November 30 } & 470,250 \\\hline \text { Net sales revenue through November 31 } & 793,000 \\\hline\end{array}$$ The company's gross profit has historically been 40% of Net sales revenue.Estimate the value of the inventory destroyed in the fire using the gross profit method.

• A) $369,950
• B) $528,550
• C) $410,000
• D) $388,450

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Definitions:

Mistake as to Existence

A legal misunderstanding or error regarding the actual existence of a subject matter or condition of a contract.

Fraudulent Misrepresentation

A false statement made knowingly without belief in its truth or recklessly and without concern for its truth, which induces another party to enter into a contract.

Rescission

The act of cancelling a contract and returning all parties involved to their positions prior to the agreement, effectively nullifying the contract's obligations.

Demonstrator

A person who participates in a public protest or demonstration.