**Inventory Destruction Scenario**Brad Essary owned a small company that sold garden equipment. The equipment was expensive, and a perpetual system was maintained for control purposes. Even so, lost, damaged, and stolen merchandise normally amounted to 4 percent of the inventory balance. On June 14, Essary's warehouse was destroyed by fire. Just prior to the fire, the accounting records contained a $166,000 balance in the Inventory account. However, inventory costing $11,800 had been sold and delivered to customers but had not been recorded in the books at the time of the fire. The fire did not affect the showroom, which contained inventory that cost $42,100.**Required**Estimate the amount of inventory destroyed by fire.**Diagram Explanation:**There is a blue rectangular box labeled "Inventory destroyed by fire" next to an empty field for the estimated amount.

Inventory lost, damaged and stolen = Inventory balance x 4% = $166000*4% = $6,640

Answered: Brad Essary owned a small company that…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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