As a Result of Taking a Physical Inventory Count on December

question 120

Multiple Choice

As a result of taking a physical inventory count on December 31, 20104 the Cookie Company inventory was determined to be $425,000. The auditors for Cookie 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: $\begin{array}{ll}\$ 330,000 & \text { Inventory }(1 / 1 / 14) \\1,770,000 & \text { Purchases (2014) } \\2,200,000 & \text { Sales (2014) } \\100,000 & \text { Sales returns (2014) } \\25 \% \text { of sales } & \text { Gross profit ratio }\end{array}$
Using the gross profit method, what did the auditors estimate as the amount of the inventory shortage at December 31, 2014?

• A) $100,000
• B) $75,000
• C) $15,000
• D) $25,000

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Definitions:

Subscapularis

A muscle in the shoulder that is part of the rotator cuff, responsible for medially rotating the arm.

Brachialis

A muscle in the upper arm that flexes the elbow joint, positioned beneath the biceps.

Levator Scapulae

A skeletal muscle located at the back and side of the neck, responsible for elevating the scapula (shoulder blade).

Latissimus Dorsi

A broad muscle in the back that helps in movement of the arms and the torso.