Gross Profit Method: Estimation of Flood LossOn 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 $9,100. The following information was available from Hodge's accounting records forProduct Tex:Inventory at November 1, 2016$102,000Purchases from November 1, 2016, to date of flood131,000Net sales from November 1, 2016, to date of flood213,000Based on recent history, Hodge had a gross margin (profit) on Product Tex of 35% of net sales.Required:1. Prepare a schedule to calculate the estimated loss on the inventory in the flood, using the gross profit method.HODGE COMPANYCalculation of Estimated Loss on Inventoryin the Flood Using Gross Margin (Profit) MethodNovember 21, 2016$Estimated cost of goods sold2. The gross profit method may not provide an accurate estimate of ending inventory when:

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Description: Gross Profit Method: Estimation of Flood LossOn 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 $9,100. The following

Solution:-1 Preparation of a schedule to calculate the estimated loss on the inventory in the flood,…

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iross Profit Method: Estimation of Flood Loss In 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 $9,100. The following information was available from Hodge's accounting records for roduct Tex: inventory at November 1, 2016 $102,000 Purchases from November 1, 2016, to date of flood 131,000 let sales from November 1, 2016, to date of flood 213,000 ased on recent history, Hodge had a gross margin (profit) on Product Tex of 35% of net sales. tequired: 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 24 Estimated cost of goods sold 2. The gross profit method may not provide an accurate estimate of ending inventory when:

iross Profit Method: Estimation of Flood Loss In 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 $9,100. The following information was available from Hodge's accounting records for roduct Tex: inventory at November 1, 2016 $102,000 Purchases from November 1, 2016, to date of flood 131,000 let sales from November 1, 2016, to date of flood 213,000 ased on recent history, Hodge had a gross margin (profit) on Product Tex of 35% of net sales. tequired: 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 24 Estimated cost of goods sold 2. The gross profit method may not provide an accurate estimate of ending inventory when:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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