A hurricane destroyed the inventory of Franklin Feed Store on September 21 of the current year. Although some of the accounting information was destroyed, the following information was discovered for the period of January 1 through September 21:
Beginning inventory, January 1 ........$120,000
Purchases through September 21 .........$450,000
Sales through September 21 ..........$800,000
The gross margin for Franklin Feed Store has traditionally been 35 percent of sales.
Required:
a. For the period ending September 21, compute the following:
(1) Estimated gross margin.
(2) Estimated cost of goods sold.
(3) Estimated inventory at September 21.
b. Assume that $8,000 of the inventory was not damaged. What is the amount of the loss from the hurricane?
c. Franklin Feed Store uses the perpetual inventory system. If some of the accounting records had not been destroyed, how would Franklin determine the amount of the inventory loss?