On April 15 of the current year, a fire destroyed the entire uninsured inventory of a retail store.The following data are available: $\begin{array}{lr}
\text { Sales, January } 1 \text { through April } 15 & \$ 300,000 \
\text { Inventory, January } 1 & 50,000 \
\text { Purchases, January } 1 \text { through April } 15 & 250,000 \
\text { Markup on cost } & 25 \%
\end{array}$

The amount of the inventory loss is estimated to be
A)$60,000.
B)$30,000.
C)$75,000.
D)$50,000.

Question

On April 15 of the current year, a fire destroyed the entire uninsured inventory of a retail store.The following data are available: $\begin{array}{lr}
\text { Sales, January } 1 \text { through April } 15 & \$ 300,000 \
\text { Inventory, January } 1 & 50,000 \
\text { Purchases, January } 1 \text { through April } 15 & 250,000 \
\text { Markup on cost } & 25 \%
\end{array}$

The amount of the inventory loss is estimated to be
A)$60,000.
B)$30,000.
C)$75,000.
D)$50,000.

Quizplus · Accepted Answer

The inventory loss is estimated to be the cost of the inventory, which is the purchases minus the markup on cost. The markup on cost is 25%, so the cost of the inventory is 80% of the purchases. Therefore, the cost of the inventory is $250,000 x 0.80 = $200,000. The inventory loss is therefore $200,000 - $50,000 = $60,000.

On April 15 of the Current Year, a Fire Destroyed