Chapter 5B, Problem 5PA

Estimate inventory. (LO 9). Hines Fruit Corp. sells fresh fruit to tourists on Interstate 75 in Florida. A tornado destroyed the entire inventory in late June. In order to File an insurance claim, Hazel and Gene, the owners of the company, must estimate the value of the lost inventory. Records from January 1 through the date of the tornado in June indicated that Hines Fruit Corp. started the year with $4,000 worth of inventory on hand. Purchases for the year amounted to $9,000, and sales up to the date of the tornado were $16,000. Gross profit percentage has traditionally been 30%.

Requirements

1. 1. How much should Hazel and Gene request from the insurance company?
2. 2. Suppose that one case of fruit was spared by the tornado. The cost of that case was $700. How much was the inventory loss under these conditions?