A fire destroyed the Churchhill Company's warehouse on March 15, 2014. Only goods with a normal selling price of $12,500 and a net realizable value of $5,000 were saved. The following information is available from the company's records : Inventory in warehouse, 01/01/2014 $250,000 Purchases 01/01/14- 03/15/14 $620,000 Purchase returns $9,500 Freight-in $14,000 $850,000 Sales, 01/01/13 - 03/15/14 Sales Return $20,000 For the period from 2009 - 2013, Churchill had a gross profit of $2,100,000 on net sales of $6,000,000. Estimate Churchill's inventory loss from the fire using the Gross Profit method.

A fire destroyed the Churchhill Company's warehouse on March 15, 2014. Only goods with a normal selling price of $12,500 and a net realizable value of $5,000 were saved. The following information is available from the company's records : Inventory in warehouse, 01/01/2014 $250,000 Purchases 01/01/14- 03/15/14 $620,000 Purchase returns $9,500 Freight-in $14,000 $850,000 Sales, 01/01/13 - 03/15/14 Sales Return $20,000 For the period from 2009 - 2013, Churchill had a gross profit of $2,100,000 on net sales of $6,000,000. Estimate Churchill's inventory loss from the fire using the Gross Profit method.

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 2MC: Denali Company manufactures household products such as windows, light fixtures, ladders, and work...

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Denali Company manufactures household products such as windows, light fixtures, ladders, and work tables. During the year it produced 10,000 Model 10X windows but only sold 5,000 units at $40 each. The remaining units cannot be sold through normal channels. Cost for inventory purposes on December 31 included the following data on the unsold units: Denali can sell the 5,000 windows at a liquidation price of $20.00 per window, but it will incur a packaging and shipping charge of $7.50 per window. Required: Identify the relevant costs and revenues for the liquidation sale alternative. Is Denali better off accepting the liquidation price rather than doing nothing? Assume that Model 10X can be reprocessed to another size window, Model 20X, which will require the same amount of labor and overhead as was required to initially produce, but sells for only $33. Determine the most profitable course of action—liquidate or reprocess.
The Sahara Company's inventory was partially destroyed on June 4, 2016, when its warehouse caught on fire early in the morning. Inventory that had a cost of $8,000 was saved. The accounting records, which were located in a fireproof vault, contained the following information: Sales (1/1/16 through 6/3/16) $260,000 Purchases (1/1/16 through 6/3/16) 190,000 Inventory (1/1/16) 40,000 Gross profit ratio 30% of cost Using the gross profit method, what is the estimated cost of the inventory destroyed by the fire?
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.
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