A substantial portion of inventory owned by Alcorn Sporting Goods was recently destroyed when the roof collapsed during a rainstorm. Alcorn also lost some of its accounting records. Alcorn must estimate the loss from the storm for insurance reporting and financial statement purposes. Alcorn uses the periodic inventory system. The following accounting information was recovered from the damaged records:
Beginning inventory ......... $ 50,000
Purchases to date of storm ........ 175,000
Sales to date of storm .......... 240,000
The value of undamaged inventory counted was $4,000. Historically Alcorn’s gross margin percentage has been approximately 25 percent of sales.
Estimate the following:
a. Gross margin in dollars.
b. Cost of goods sold.
c. Ending inventory.
d. Amount of lost inventory.