A company has inventory of $550,000 in a warehouse that's is completely destroyed by fire. There is no insurance to cover this loss. The cost to replace the inventory is $500,000. What inventory cost should the manager use to estimate economic profit?

A company has inventory of $550,000 in a warehouse that's is completely destroyed by fire. There is no insurance to cover this loss. The cost to replace the inventory is $500,000. What inventory cost should the manager use to estimate economic profit?

Century 21 Accounting Multicolumn Journal

11th Edition

ISBN:9781337679503

Author:Gilbertson

Publisher:Gilbertson

Chapter20: Accounting For Inventory

Section: Chapter Questions

Problem 1CP

See similar textbooks

Related questions

Q: Adams Corporation estimates that it lost $75,000 in inventory from a recent flood. The following…

A: Formula to calculate gross profit ratio:

Q: I am having trouble computing ending inventory from assets. On December 31, Pitts Manufacturing…

A: The inventories are following types: Raw materials – Raw materials are required for further…

Q: The Main Company requires an estimate of cost of goods lost in a fire on May 10, 2019. Merchandise…

A: Inventory is the detailed list of items that are present on hand. It constitute of all the finished…

Q: 46.The showroom of Sundale Furniture was flooded due to a recent cyclone and its inventory was…

A: Revenue = $280,000 Gross profit ratio = Revenue-COGSRevenue…

Q: Bobbie Howell was at home when he received a call from the fire department telling him his store had…

A: To calculate the inventory which is lost in fire , we need to calculate the closing inventory as on…

Q: Blossom Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on…

A: Cost of goods sold is the total cost incurred on the goods which are sold during the period and the…

Q: Sheffield, Inc. has 8 computers which have been part of the inventory for over two years. Each…

A: Cost of computer = $550 Selling price = $940 Replacement cost = $350…

Q: On March 15, a fire destroyed MyCompany's entire retail inventory. The inventory on hand as of…

A: Cost of goods sold = Beginning inventory + Purchases + Freight in - Closing inventory

Q: A woodland furniture trading company sells furniture to its customers. A table that cost the company…

A: Net relizable value = Expected sales price - cost to sell = OMR 1950 - OMR 35 = OMR 1915

Q: Over the past 3 years, the gross profit rate for Jini Company was 30%. Last week a fire destroyed…

A: Inventory destroyed = Beginning inventory + Net purchases - Cost of goods sold Cost of goods sold =…

Q: On March 1, AYE Merchandising had an inventory of P560,000 in its retail store. Purchases made in…

A: The merchandise loss can be incurred due to fire or theft, etc. This loss can be estimated with the…

Q: ABC Company had the following transactions during the quarter ended March 31, 20x1: Loss from…

A: Solution: Amount should be included in income statement for the quarter ended March 31, 20X1 = Loss…

Q: The financial records of Richard Co. were destroyed by fire at the end of 1999 fortunately the…

A: The multi-step income statement is an income statement that separates the total revenue and expenses…

Q: The ABC Company had its entire inventory destroyed when a fire swept through the company's…

A: Inventory valuation is a technique that is used by companies to find out the value of the ending…

Q: On June 13, 20X8, a fire completely destroyed all the inventory of Salmon Lumber Company.…

A: Under Gross profit method, cost of sales is calculated from sales and gross profit earned. Further,…

Q: A local company located in Nizwa assembles engines for customized trekking sport utility vehice SUV.…

A: ABC analysis is a system for inventory control used throughout materials and distribution…

Q: C Ltd is a company in the chemical industry, situated near the Eden Lake. Its year end is 30th June…

A: C Ltd is a company in the chemical industry, situated near the Eden Lake. Its year end is 30th June…

Q: Duke Company's records show the following account balances at December 31, 2021: $15,600,000 9,300,…

A: Computation of Other Comprehensive Income (Loss) Foreign Currency Translation, Net of Tax…

Q: Mushroom Inc. had an explosion in its plan that destroyed most of its inventory. Its records show…

A: Given: Beginning inventory =$40000Purchases =$480000Sales =$620000gross profit=25%Sale of damaged…

Q: All goods were completely destroyed except for partially damaged goods that normally sell for…

A: Calculation of Closing Inventory: Particulars Amount(P) Opening Inventory, January 1 P1,320,000…

Q: On June 29, 20x1, a fire damaged the warehouse and factory of an entity completely destroying the…

A: When sometimes inventory is being destroyed by fire or any other natural calamity, then inventory…

Q: Inventory

A: Trading A/c…

Q: Which of the following transactions would reduce net income for the period and why?

A: Accounting: Accounting is a system, or a process of collecting and organizing economic…

Q: Given: The Company showed a net loss of P140,600 with Cost of Goods Sold of P546,900 which is 60% of…

A: Formulas: Total expenses = Net Loss + Gross profit where, Gross profit = Sales - Cost of goods sold

Q: Brad Essary owned a small company that sold garden equipment. The equipment was expensive, and a…

A: Inventory lost, damaged and stolen = Inventory balance x 4% = $166000*4% = $6,640

Q: On 1 September 20x6, a business had inventory of $380,000. During the month, sales totalled $650,000…

A: We have the following information: Opening Inventory: $380,000 Sales: $650,000 Purchases: $480,000…

Q: On March 1, AYE Merchandising had an inventory of P560,000 in its retail store. Purchases made in…

A: Loss by Fire - Loss by fire or any other natural calamities is an extraordinary loss for the…

Q: On October 31, 2010, a flood at Pamela Company’s only warehouse caused severe damage to its entire…

A: Cost of goods sold:- It refers to the direct cost of producing the goods sold by a company. This…

Q: Pharoah Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The…

A: Break even refers to the situation when there is no loss or no profit or at this point the total…

Q: On June 30, a fire destroyed Intense Company's entire inventory. The inventory on January 1 totaled…

A: Cost of goods sold = P7800000 × 70% = P5460000

Q: Riverbed Inc.’s April 30 inventory was destroyed by the explosion of an underground oil tank.…

A: The ending inventory is the inventory that is left unsold in the business.

Q: On 1st Jan 2006, a business had inventory of $19,000. During the month, sales totalled $32,500 and…

A: Here, we need to use the retail gross profit method to assess thr loss. This method is used by the…

Q: LAVARN Company sells milled rice in Isabela Province. On September 15, a flood destroyed the…

A: Estimated ending inventory can be calculated by deducting the total cost of goods sold from total…

Q: Indicate the assumption or principle that is most clearly violated using the following terms, chosen…

A: Generally Accepted Accounting Principles- GAAP stands for Generally Accepted Accounting Principle.…

Q: The following items were included in the inventory list of ABC Corp: Materials unused in the…

A: A manufacturing bussiness means any business that use raw materials, parts, components to process…

Q: On April 15 of the current year, a fire destroyed the entire uninsured inventory of a retail store.…

A: Gross Profit on Sales= 25% ÷ (100% + 25%) = 20%Ending Inventory= Beginning inventory + Net purchases…

Q: On April 15 of the current year, a fire destroyed the entire inventory of Nourish, a retail store.…

A: On April 15 of the current year, a fire destroyed the entire inventory of Nourish, a retail store.…

Q: David Patel was at home when he received a call from the fire department telling him his store had…

A: Net Purchases = Purchases for the year + Freight In = $280,000 + $13,700 = $293,700 Cost of goods…

Q: On 1 September 20X6, a business had inventory of $380,000. During the month, sales totalled…

A: We have the following information On 1 September 20X6, a business had inventory of $380,000 During…

Q: Over the past 3 years, the gross profit rate for Jini Company was 42%. Last week a fire destroyed…

A: Beginning inventory = $ 6350 Net purchases = $ 64700 Net sales at retail = $ 49700 Gross profit…

Q: The Board of Directors decides that old inventory costing €18,000 is to be written off as the…

A: As per international financial reporting standards Inventory is to be measured at cost or net…

Concept explainers

Property Insurance

Property insurance protects property from unforeseeable loss or damage and covers property owners' liability. Property insurance provides financial compensation to the property owner or renter in the event of damage or theft, as well as to someone other than the owner or renter if that person is injured on the property. Property insurance covers all risks of damage caused by theft, fire, flood, cyclones, lighting, and natural calamities, among other things. The primary goal of property insurance is to require the property owner to cover the loss. A monthly premium is paid to the insurance company, and in exchange, the insurance company pays for damage based on the agreement stated in the policy. Property insurance protects assets such as a vehicle, auto, car, rental home, house, and valuable property.

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

On 1st Nov 2020, a business had inventory of $380,000. During the month, sales totalled $650,000 and purchases $480,000. On 30th Nov 2020 a flood destroyed some of the inventory. The undamaged goods in inventory were valued at $220,000. The business operates with a standard gross profit margin of 25%.Based on this information, what is the cost of the inventory destroyed in the flood?
David Patel was at home when he received a call from the fire department telling him his store had burned. His business was a total loss. The insurance company asked him to prove his inventory loss. For the year, until the date of the fire, Patel's company had sales of $450,000 and purchases of $280,000. Freight-in amounted to $13,700, and beginning inventory was $45,000. Patel always priced his goods to achieve a gross margin of 40 percent. Compute patel's estimated inventory loss.
The ABC Company had its entire inventory destroyed when a fire swept through the company's warehouse. Fortunately, the accounting records were locked in a fireproof safe and were not damaged. The following information for the period up to the date of the fire was taken from the accounting records: Sales ................................................. P486,400 Purchases ......................................... 295,000 Beginning inventory .......................... 147,800 Purchase returns .............................. 16,600 Freight-in ........................................... 8,200 Assuming that the gross profit has averaged 25 percent of selling price, what is the estimated value of the inventory destroyed in the fire? Show all calculations in good form. Assuming that the markup percentage on cost is 28 percent, what is the estimated value of the inventory destroyed in the fire? Show all calculations in good form.
Mushroom Inc. had an explosion in its plan that destroyed most of its inventory. Its records show that beginning inventory was $40,000. Mushroom made purchases of $480,000 and sales of $620,000 during the year. Its normal gross profit percentage is 25%. It can sell some of its damaged inventory for $5,000. The insurance company will reimburse Mushroom for 70% of its loss. What amount should Mushroom reports as loss from the explosion on its financials? $50,000 $35,000 $18,000 $15,000
A company has an inventory of 1,000 assorted parts for a tool that has been discontinued. The inventory cost is $78,000. The parts can be either (a) remachined at total additional costs of $24,500 and thensold for $33,000 or (b) sold as scrap for $6,500. Based only on quantitative data, which action should be taken? Remachine since the difference in favor of remachining is $2000 b. Remachine since the difference in favor of remachining is $8500 c. Sell as scrap since the difference in favor of selling is $6500 d. Sell as scrap since the difference in favor of selling is $2000 Clear my choice
On 1st Jan 2006, a business had inventory of $19,000. During the month, sales totalled $32,500 and purchases $24,000. On 31st Jan 2006 a fire destroyed some of the inventory. The undamaged goods in inventory were valued at $11,000. The business operates with a standard gross profit margin of 30%. Based on this information, what is the cost of the inventory destroyed in the fire?
The Star Company's inventory was partially destroyed on July 4, 2004, when its warehouse caught on fire early in the morning. Inventory that had a cost of $8,500 was saved. The accounting records, which were located in a fireproof vault, contained the following information. Sales (1/1/04 through 7/3/04) $225,000 Purchases (1/1704 through 7/3/04) 180,000 Inventory (1/1/04) 45,000 Gross Profit Ratio 25% of cost Using the gross profit method, what is the estimated cost of the inventory destroyed by the fire? a. $17,500b. $25,000c. $30,000d. $36,500
Wormold Industries suffered a fire in its warehouse on March 4, 2021. The warehouse was fullof finished goods, and after reviewing the damage, management determined that inventory,with a retail selling price of $90,000, was not damaged by the fire.For the period from January 1, 2021, to March 4, 2021, accounting records showed thefollowing: Purchases $650,000Purchase returns 16,000Sales revenue 955,000 The inventory balance on January 1, 2021, was $275,000, and the company has historicallyearned a gross profit percentage of 35%.Required: Use the gross profit method to determine the cost of inventory damaged by the fire.
Beltrack Co. has a normal gross profit of 45%. On the night of October 5, 2020., welders remodeling a section of the warehouse neglected to turn off all of their equipment, and a resulting fire did damage to the warehouse and some of the inventory. The following is made available to you from January 1, 2020 to October 5, 2020: Sales Delivery Expense $3,400 Inventory after fire on Oct 6th $66,500 Inventory on January 1, 2018 $211,500 Purchase Returns $7,200 Purchases $212,400 Sales $330,500 Sales Returns $4,200 Transportation In $4,800 a Required: Prepare a schedule based on the above date to compute the Cost of Goods Available for Sale Give your answer here b Required: What is the historical cost of goods…
On June 29, 20x1, a fire damaged the warehouse and factory of an entity completely destroying the unisuredmerchandise inventory. The following data are available:Inventory, January 1 60,000Purchases, January 1 – June 29 580,000Sales, January 1 – June 29 770,000Markup based on cost 25%How much is the estimated inventory fire loss?
Company B has outdated inventory costing $300,000 in the warehouse that is held for over 2 years. It is expected that the inventory would be sold to the customers at only 50% of the cost next year. The client has a net income of $2,000,000. Management claimed that the inventory has not been sold and therefore it should be continued to record at cost. Q) For Company B, draft the opinion paragraph and any corresponding basis of opinion paragraph (if any). Effects on financial statements from any violation on the accounting standards should be calculated and stated in the basis of opinion paragraph if applicable. Assume tax rate of 10% when necessary.
On June 30, a fire destroyed Intense Company's entire inventory. The inventory on January 1 totaled P6,600,000. From January 1 through the time of the fire, the entity made purchases of P3,000,000, incurred freight in of P300,000, and had sales of P7,800,000. The rate of gross profit on selling price is 30%. What is the approximate cost of the inventory that was destroyed? 3,600,000 C. 4,140,000 3,900,000 D. 4,440,000