As a result of taking a physical inventory count on December 31, 2004, the Chuckles...
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Accounting
As a result of taking a physical inventory count on December 31, 2004, the Chuckles Company inventory was determined to be $82,500. The auditors for Chuckles suspected an inventory shortage and used the gross profit method to estimate the ending inventory. The accounting records for the company contained the following information:
| Inventory (1/1/04) | $ 130,000 |
| Purchases (2004) | 760,000 |
| Sales (2004) | 1,020,000 |
| Sales Returns (2004) | 60,000 |
| Gross Profit Ratio | 30% of sales |
Using the gross profit method, what did the auditors estimate as the amount of the inventory shortage at December 31, 2004?
| a. | $240,000 |
| b. | $100,000 |
| c. | $135,500 |
| d. | $170,000 |
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