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g A physical inventory taken on December 31, 2020, resulted in an ending inventory of $1,150,000. Historically, Jensen's gross margin on sales has remained constant at 25%. Jensen suspects that an unusual amount of inventory may have been damaged and disposed of without appropriate tracking. At December 31, 2020, what is the estimated cost of missing inventory

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Answer: $350,000

Explanation:

The Cost of Goods sold according to the Gross margin on sales is:

COGS = Revenue - (Gross margin * Revenue)

= 6,400,000 - (25% * 6,400,000)

= $4,800,000

The COGS according to the income statement formula:

= Opening inventory + Purchases - Closing inventory

= 1,300,000 + 5,000,000 - 1,150,000

= $5,150,000

The difference is the missing inventory

Difference = 5,150,000 - 4,800,000

= $350,000

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