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1. Prepare a schedule to calculate the estimated loss on the inventory in the flood, using the gross profit method. HODGE COMPANY Calculation of Estimated Loss on Inventory in the Flood Using Gross Margin (Profit) Method November 21, 2016 Estimated cost of goods sold 2. The gross profit method may not provide an accurate estimate of ending inventory when:

1. Prepare a schedule to calculate the estimated loss on the inventory in the flood, using the gross profit method. HODGE COMPANY Calculation of Estimated Loss on Inventory in the Flood Using Gross Margin (Profit) Method November 21, 2016 Estimated cost of goods sold 2. The gross profit method may not provide an accurate estimate of ending inventory when:

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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1. Prepare a schedule to calculate the estimated loss on the inventory in the flood, using the gross profit method. HODGE COMPANY Calculation of Estimated Loss on Inventory in the Flood Using Gross Margin (Profit) Method November 21, 2016 Estimated cost of goods sold 2. The gross profit method may not provide an accurate estimate of ending inventory when: Accounts Payable Add: Salvage goods Add: Estimated gross margin (profit) Cash Cost of goods available for sale Estimated cost of goods sold Estimated cost of inventory at date of flood Estimated loss on inventory in the flood Inventory at November 1, 2016 Net sales from November 1, 2016, to date of flood Less: Estimated gross margin (profit) Less: Salvage goods Purchases from November 1, 2016, to date of flood
Transcribed Image Text:1. Prepare a schedule to calculate the estimated loss on the inventory in the flood, using the gross profit method. HODGE COMPANY Calculation of Estimated Loss on Inventory in the Flood Using Gross Margin (Profit) Method November 21, 2016 Estimated cost of goods sold 2. The gross profit method may not provide an accurate estimate of ending inventory when: Accounts Payable Add: Salvage goods Add: Estimated gross margin (profit) Cash Cost of goods available for sale Estimated cost of goods sold Estimated cost of inventory at date of flood Estimated loss on inventory in the flood Inventory at November 1, 2016 Net sales from November 1, 2016, to date of flood Less: Estimated gross margin (profit) Less: Salvage goods Purchases from November 1, 2016, to date of flood
Gross Profit Method: Estimation of Flood Loss On November 21, 2016, a flood at Hodge Company's warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable damaged goods can be sold for $10,200. The following information was available from Hodge's accounting records for Product Tex: Inventory at November 1, 2016 Purchases from November 1, 2016, to date of flood Net sales from November 1, 2016, to date of flood Based on recent history, Hodge had a gross margin (profit) on Product Tex of 25% of net sales. Required: $106,000 146,000 223,000 1. Prepare a schedule to calculate the estimated loss on the inventory in the flood, using the gross profit method.
Transcribed Image Text:Gross Profit Method: Estimation of Flood Loss On November 21, 2016, a flood at Hodge Company's warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable damaged goods can be sold for $10,200. The following information was available from Hodge's accounting records for Product Tex: Inventory at November 1, 2016 Purchases from November 1, 2016, to date of flood Net sales from November 1, 2016, to date of flood Based on recent history, Hodge had a gross margin (profit) on Product Tex of 25% of net sales. Required: $106,000 146,000 223,000 1. Prepare a schedule to calculate the estimated loss on the inventory in the flood, using the gross profit method.
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