Gore Company's accounting records indicated the following information:
A physical inventory taken on December 31, 2008, resulted in an ending inventory of $700,000. Gore's gross profit on sales has remained constant at 25% in recent years. Gore suspects some inventory may have been taken by a new employee. At December 31, 2008, what is the estimated cost of missing inventory?

Question

Gore Company's accounting records indicated the following information:
 A physical inventory taken on December 31, 2008, resulted in an ending inventory of $700,000. Gore's gross profit on sales has remained constant at 25% in recent years. Gore suspects some inventory may have been taken by a new employee. At December 31, 2008, what is the estimated cost of missing inventory?

Quizplus · Accepted Answer

$3,800,000 × .75 = $2,850,000 (COGS)
$600,000 + $3,000,000 - $2,850,000 - $700,000 = $50,000

Gore Company's Accounting Records Indicated the Following Information