H. Hunter Company's records indicate the following information for the year: $$\begin{array} { l r }
\text { Merchandise inventory, 1/1 } & \$ 550,000 \
\text { Purchases } & 2,250,000 \
\text { Net sales } & 3,200,000
\end{array}$$ On December 31, a physical inventory determined that ending inventory of $500,000 was in the warehouse. H. Hunter's gross profit on sales has remained constant at 30%. H. Hunter suspects some of the inventory may have been taken by some new employees. At December 31, what is the estimated cost of missing inventory?
A) $60,000
B) $100,000
C) $150,000
D) $1,340,000

Question

H. Hunter Company's records indicate the following information for the year: $$\begin{array} { l r } 
\text { Merchandise inventory, 1/1 } & \$ 550,000 \
\text { Purchases } & 2,250,000 \
\text { Net sales } & 3,200,000
\end{array}$$ On December 31, a physical inventory determined that ending inventory of $500,000 was in the warehouse. H. Hunter's gross profit on sales has remained constant at 30%. H. Hunter suspects some of the inventory may have been taken by some new employees. At December 31, what is the estimated cost of missing inventory?
A) $60,000
B) $100,000
C) $150,000
D) $1,340,000

Quizplus · Accepted Answer

The cost of goods sold (COGS) is 70% of net sales (100% - 30% gross profit). COGS = $3,200,000 * 70% = $2,240,000. The expected ending inventory is $550,000 + $2,250,000 - $2,240,000 = $560,000. The actual ending inventory is $500,000, so the missing inventory is $560,000 - $500,000 = $60,000.

H Hunter Company's Records Indicate the Following Information for the Year