Brad Essary owned a small company that sold garden equipment. The equipment was expensive, and a perpetual system was maintained for control purposes. Even so, lost, damaged, and stolen merchandise normally amounted to 4 percent of the inventory balance. On June 14, Essary's warehouse was destroyed by fire. Just prior to the fire, the accounting records contained a $138,000 balance in the Inventory account. However, inventory costing $17,000 had been sold and delivered to customers but had not been recorded in the books at the time of the fire. The fire did not affect the showroom, which contained inventory that cost $35,200. Required Estimate the amount of inventory destroyed by fire. Inventory destroyed by fire

Brad Essary owned a small company that sold garden equipment. The equipment was expensive, and a perpetual system was maintained for control purposes. Even so, lost, damaged, and stolen merchandise normally amounted to 4 percent of the inventory balance. On June 14, Essary's warehouse was destroyed by fire. Just prior to the fire, the accounting records contained a $138,000 balance in the Inventory account. However, inventory costing $17,000 had been sold and delivered to customers but had not been recorded in the books at the time of the fire. The fire did not affect the showroom, which contained inventory that cost $35,200. Required Estimate the amount of inventory destroyed by fire. Inventory destroyed by fire

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 79.3C: Ethics and Inventory An electronics store has a large number of computers that use outdated...

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Ethics and Inventory An electronics store has a large number of computers that use outdated technology in its inventory. These computers are reported at their cost. Shortly after the December 31 year end, the store manager insists that the computers can be sold for well over their cost. But the stores accountant has been told by the sales staff that it will be difficult to sell these computers for more than half of their inventory cost. Required: What are the consequences for the business of failing to recognize the decline in value?
Muller Computers stores its inventory in a warehouse that burned to the ground in late November, 2018. Their sales office was at a different location. In order to file a claim with their insurance, the owners ask you to estimate the inventory that was in the warehouse. The following information is available: Beginning Inventory 375,000 Purchases through November 30 470,250 Net sales revenue through november 30 793,000 The company's gross profit has historically been 40% of net sales revenue. Estimate the value of the inventory destroyed in the fire using the gross profit method. a.$528,550 b.$388,450 c.$369,950 d.$410,000
Mary Potts arrived at her stored on the morning of January 29, she found empty shelves and display racks; thieves had broken in during the night and stolen the entire inventory. Accounting record showed that Potts had inventory costing $50,000 on January 1. From January 1 to January 29, Potts had made net sales of $70,000 and net purchase of $80,000. The gross profit during the past several years had consistently averaged 42 percent of net sales. Potts plan to file an insurance claim for the theft loss. a. Using gross profit method, estimate the cost of inventory at the time of the theft b. Does Potts use the periodic inventory method or does she account for inventory using the perpetual method? Please could defend your answer.
6. On June 30, 20X3, a storm damaged a warehouse of ABC Company. The entire inventory and many accounting records stored in the warehouse were completely destroyed. Although the inventory was not insured, a portion could be sold for scrap. Through the use of microfilmed records, the following data are assembled. Inventory, January 1 7,500,000 Purchases, January 1 – June 30 31,500,000 Cash sales, January 1 – June 30 5,000,000 Collection of accounts receivable, January 1 – June 30 45,000,000 Accounts receivable, January 1 3,000,000 Accounts receivable, June 30 4,000,000 Salvage value of inventory 400,000 Gross profit percentage on sales 40% The inventory loss as a result of the storm should be reported at a.8,400,000 b.8,000,000 c.9,000,000 d.8,600,000
On February 26 a hurricane destroyed the entire inventory stored in a warehouse owned by the Rockford Corporation. The following information is available from the records of the company’s periodic inventory system: beginning inventory, $220,000; purchases and net sales from the beginning of the year through February 26, $400,000 and $600,000, respectively; gross profit ratio, 30%. Estimate the cost of the inventory destroyed by the hurricane using the gross profit method. Beginning inventory Plus: Net purchases Cost of goods available for sale Less: Cost of goods sold: Net sales Less: Estimated gross profit Estimated cost of goods sold Estimated cost of inventory destroyed
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.
On October 1, 20x1, the warehouse of ABC Co. and all the inventories contained therein were damaged by flood. Off-site back up of data base shows the following information: Inventory, Jan. 1 10,000 Accounts payable, Jan. 1 3,000 Accounts payable, Sept. 30 2,000 Payments to suppliers 50,000 Freight-in 500 Purchase returns 500 Sales from Jan. to Sept. 80,000 Sales returns 5,000 Sales discounts 2,000 Gross profit rate based on sales 30% Additional information: Goods in…
The inventory of Swifty Company was destroyed by fire on March 1. From an examination of the accounting records, the following data for the first 2 months of the year are obtained: Sales Revenue $53,000, Sales Returns and Allowances $1,000, Purchases $34,000, Freight-In $1,300, and Purchase Returns and Allowances $1,500.Determine the merchandise lost by fire, assuming: A beginning inventory of $20,000 and a gross profit rate of 32% on net sales. Estimated cost of merchandise lost $enter the Estimated cost of merchandise lost in dollars A beginning inventory of $31,000 and a gross profit rate of 41% on net sales. Estimated cost of merchandise lost $enter the Estimated cost of merchandise lost in dollars
The inventory of Swifty Company was destroyed by fire on March 1. From an examination of the accounting records, the following data for the first 2 months of the year are obtained: Sales Revenue $53,000, Sales Returns and Allowances $1,000, Purchases $34,000, Freight-In $1,300, and Purchase Returns and Allowances $1,500.Determine the merchandise lost by fire, assuming: A beginning inventory of $20,000 and a gross profit rate of 32% on net sales. Estimated cost of merchandise lost $enter the Estimated cost of merchandise lost in dollars
1. A whisteblower notified Bandolin Co. that one of its employees is stealing its merchandise. A physical count on Nov. 30, 20x1 revealed P 443, 000 of Product X were on hand. The accounting records shows the following: Inventory, jan 1 162, 000 Purcases, Jan 1 to Nov. 30( includes P56,000 goods in transit shipped FOB shipping point) 3,324,000 Purchase return and discounts 16,000 Freight in 104,000 Sales 4,654,000 Sales returns 10,000 Bandolin Co, consistently marks-up Product X at 35% based on sale…
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