On August 15, 2011, a hurricane damaged a warehouse of Rheinhart Merchandise Company. The entire inventory and

Question:

On August 15, 2011, a hurricane damaged a warehouse of Rheinhart Merchandise Company. The entire inventory and many accounting records stored in the warehouse were completely destroyed. Although the inventory was not insured, a portion could be sold for scrap. Through the use of the remaining records, the following data are assembled:

Inventory, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 375,000

Purchases, January 1–August 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,385,000

Cash sales, January 1–August 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,000

Collection of accounts receivable, January 1–August 15 . . . . . . . . . 2,115,000

Accounts receivable, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,000

Accounts receivable, August 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,000

Salvage value of inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000

Gross profit percentage on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 32%

Compute the inventory loss as a result of the hurricane.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...