Harry Company's records indicate the following information: Merchandise inventory, January 1, 20X7 Purchases, January 1 through December 31, 20X7 Sales, January 1 through December 31, 20X7 P 550,000 2,250,000 3,000,000 On December 31, 20X7, a physical inventory determined that ending inventory of P600,000 was in the warehouse. Harry's gross profit on sales has remained constant at 30%. Harry suspects some of the inventory may have been taken by some new employees. At December 31, 20X7, what is the estimated cost of missing inventory?

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Q: On December 31, 2010, what is the estimated cost of missing inventory?

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Q: Henderson Company uses the gross profit method to estimate ending nventory and cost of goods sold…

A: The gross profit method is an inventory valuation technique used to estimate the ending inventory…

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.