ABC Corporation lost most of its inventory in a fire on April 10, 2020. Its books disclosefollowing data:Inventory, January 1, 2020Purchases in 2020Purchases returnsSalesSales returnsPurchases discountsRate of gross profit on salesS180,000400,00030,000650,00025,00010,00030%Through the diligence of the local Fire Department, ABC was able to salvage andmerchandise costing $4,000.Required: Calculate the amount of the loss from the fire, to be presented as a claim to thcompany. Show your computations.

In order to calculate the stock destroyed we need to calculate the ending inventory as on the date…

ABC Corporation lost most of its inventory in a fire oe April 10, 2020. ts books dinclon following data Inventory, January 1, 2020 Purchases in 2020 Purchases returns Sales Sales returns Purchases discounts Rate of gross profit on sales SI80,000 400,000 30,000 650,000 25,000 10,000 30% Through the diligence of the local Fire Department, ABC was able to salvage and merchandise costing $4,000. Required: Calculate the amount of the loss from the fire, to be presented as a claim to t company. Show your computations.

ABC Corporation lost most of its inventory in a fire oe April 10, 2020. ts books dinclon following data Inventory, January 1, 2020 Purchases in 2020 Purchases returns Sales Sales returns Purchases discounts Rate of gross profit on sales SI80,000 400,000 30,000 650,000 25,000 10,000 30% Through the diligence of the local Fire Department, ABC was able to salvage and merchandise costing $4,000. Required: Calculate the amount of the loss from the fire, to be presented as a claim to t company. Show your computations.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 8E: In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because...

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Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the direct method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the allowance method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO belter represented the flow of their inventory. Management prepared the following analysis showing the effect of this change: Frost reported net income of 2,500,000, 2,400,000, and 2,100,000 in 2018, 2019, and 2020, respectively. The tax rate is 21%. Required: 1. Prepare the journal entry necessary to record the change. 2. What amount of net income would Frost report in 2018, 2019, and 2020? 3. If Frosts employees received a bonus of 10% of income before deducting the bonus and income taxes in 2018 and 2019, what would be the effect on net income for 2018, 2019, and 2020?
LIFO Liquidation Profit Hammond Company adopted LIFO when it was formed on January 1, 2017. Since then, the company has had the following purchases and sales of its single inventory item: In December 2020, the controller realized that because of an unexpected increase in demand, the company had sold 22,000 units but had purchased only 19,000 units during the year. In 2020, each unit had been sold for 19, and each unit purchased had cost 10. The income tax rate is 21%. Required: 1. Next Level If Hammond makes no additional purchases in 2020, how much LIFO liquidation profit will it report? 2. Prepare the appropriate annual report disclosures for 2020. 3. Next Level if Hammond purchases an additional 7,000 units in December 2020, how much income tax will the company save? 4. Next Level If Hammond purchases the additional 7,000 units, how much income tax has the company saved over the 4-year period by using LIFO instead of the FIFO cost flow assumption?
Kraft Manufacturing Company manufactures two products: Mult and Tran. At December 31, 2019, Kraft used the FIFO inventory method. Effective January 1, 2020, Kraft changed to the LIFO inventory method. The cumulative effect of this change is not determinable, and, as a result, the ending inventory of 2019, for which the FIFO method was used, is also the beginning inventory for 2020 for the LIFO method. Any layers added during 2020 should be costed by reference to the first acquisitions of 2020, and any layers liquidated during 2020 should be considered a permanent liquidation. The following information was available from Krafts inventory records for the two most recent years: Required: Compute the effect on income before income taxes for the year ended December 31, 2020, resulting from the change from the FIFO to the LIFO inventory method.
Schmidt Company began operations on January 1, 2018, and used the LIFO inventory method for both financial reporting and income taxes. However, at the beginning of 2020, Schmidt decided to switch to the average cost inventory method for financial and income tax reporting. It had previously reported the following financial statement information for 2019: An analysis of the accounting records discloses the following cost of goods sold under the LIFO and average cost inventory methods: There are no indirect effects of the change in inventory method. Revenues for 2020 total 130,000; operating expenses for 2020 total 30,000. Schmidt is subject to a 21% income tax rate in all years; it pays all income taxes payable in the next quarter. Assume that any deferred tax liability was paid in the subsequent year. Schmidt had 10,000 shares of common stock outstanding during all years; it paid dividends of 1 per share in 2020. At the end of 2020, Schmidt had cash of 15,600, inventory of 34,000, other assets of 76,000, income taxes payable of 4,200, and accounts payable of 3,000. It desires to show financial statements for the current year and previous year in its 2020 annual report. Required: 1. Prepare the journal entry to reflect the change in method at the beginning of 2020. Show supporting calculations. 2. Prepare the 2020 financial statements. Notes to the financial statements are not necessary. Show supporting calculations.
Koopman Company began operations on January 1, 2018, and uses they FIFO inventory method for financial reporting and the average cost inventory method for income taxes. At the beginning of 2020, Koopman decided to switch to the average cost inventory method for financial reporting. It had previously reported the following financial statement information for 2019: An analysis of the accounting records discloses the following cost of goods sold under the FIFO and average cost inventory methods: There are no indirect effects of the change in inventory method. Revenues for 2020 total 130,000; operating expenses for 2020 total 30,000. Koopman is subject to a 21% income tax rate in all years; it pays the income taxes payable of a current year in the first quarter of the next year. Koopman had 10,000 shares of common stock outstanding during all years; it paid dividends of 1 per share in 2020. At the end of 2020, Koopman had cash of 10,000, inventory of 24,000, other assets of 70,800, accounts payable of 4,500, and income taxes payable of 6,000. It desires to show financial statements for the current year and previous year in its 2020 annual report. Required: 1. Prepare the journal entry to reflect the change in methods at the beginning of 2020. Show supporting calculations. 2. Prepare the 2020 financial statements. Notes to the financial statements are not necessary. Show supporting calculations.
How to solve these? The financial records of DISGRASYA Inc. were destroyed by fire at the end of 2020. Selected information gathered are the following: Inventory on January 1 was P92,000 and decreased by 20% during the year. Sales discount amounted to P17,000. Interest expense is P20,000. Cost of sales is P500,000. Administrative expenses amounted to 20% of cost of sales but only 8% of gross sales. Two thirds of operating expenses relate to sales activities. The company is subject to 30% income tax. How much is the net income (net loss) during 2020? The changes in account balances of ENIGMA Co. during 2020 are as follows: Assets: P133,500 increase Liabilities: P40,500 decrease Ordinary share capital: P90,000 increase Share premium: P9,000 increase. Assuming there are no changes in retained earnings except for net income and a dividend payment of P19,500, how much is the net income (net loss) for 2020? The following accounts and their balances appear in an unadjusted trial balance of…
The financial record of Adam Inc were destroyed by fire at the end of 2020. Fortunately, the controller had kept certain statistical data related to the income statement as below: a. The beginning inventory was OMR 138,000. b. Sales discount was OMR 25,500 c. 45,000 ordinary shares were outstanding. d. Interest expenses OMR 30,000 e. Income tax rate 30% f. Cost of goods sold OMR 750,000 g. Administrative expenses are 20% of cost of goods sold but only 10% of gross sales. h. Half of the operating expenses related to sales activities. From the foregoing information, prepare an income statement.Page
In 2022, Sargent Company experienced a major casualty loss. The roof of its warehouse collapsed in an ice storm and destroyed its entire inventory. The company began the year with inventory of $300. It made purchases of $5,640 but returned $80 worth of merchandise. Sales prior to the ice storm were $9,400. Sargent must use the gross profit method to determine inventory on hand on the date of the casualty. The following is an excerpt of its income statement for the last three years. 2019 2020 2021 Net Sales $5,000 $6,000 $9,000 Cost of Goods Sold 2,150 2,340 3,312 General and Administrative Expense 500 600 900 Depreciation Expense 125 200 325 Operating Income $2,225 $2,860 $4,463 Requirement. Assume that Sargent uses the most recent three years of net sales and cost of goods sold to determine its historical gross profit. What are estimated cost of goods sold, estimated gross profit, and estimated ending…
The financial records of LeRoi Jones Inc. were destroyed by fire at the end of 2020. Fortunately, the controller had kept certain statistical data related to the income statement as follows. 1. The beginning merchandise inventory was $92,000 and decreased 20% during the current year. 2. Sales discounts amount to $17,000. 3. 20,000 shares of common stock were outstanding for the entire year. 4. Interest expense was $20,000. 5. The income tax rate is 30%. 6. Cost of goods sold amounts to $500,000. 7. Administrative expenses are 20% of cost of goods sold but only 8% of gross sales. 8. Four-fifths of the operating expenses relate to sales activities. Instructions From the foregoing information prepare an income statement for the year 2020 in single-step form.
BBM Company lost most of its inventory in a fire in December, 2021, just before the year-end physical inventory was taken. The company’s books disclosed the following:Invy, 1/1/21 - 1,700,000Purchases - 3,900,000 Purchase return - 300,000Sales - 6,500,000 Sales returns - 240,000Merchandise costing P126,000 remain undamaged after the fire. Damaged merchandise with an original selling price of P150,000 had a net realizable value of P53,000. A partial comparative profit and loss for 2020 and 2019 also disclosed the following:2020: Sales - 5,000,000; CGS - 3,025,0002019: Sales - 5,600,000; CGS - 3,332,000Assuming that BBM Company had no insurance coverage, what is the amount of loss as a result of the fire?