On January 20, 2020, Stewart Company’s records revealed the following information:Inventory, July 1, 2019$ 55,300Purchases, July 1, 2019–January 20, 2020382,100Sales, July 1, 2019–January 20, 2020592,000Purchases returns10,400Purchases discounts taken6,800Freight-in3,500Sales returns6,600A fire destroyed the entire inventory on January 20, 2020, except for purchases in transit, FOB shipping point of $6,000, and goods having a selling price of $4,700 that were salvaged from the fire. The salvaged goods had an estimated salvage value of $2,900. The average gross profit on net sales in previous periods was 40%.Required:1. Compute the cost of the inventory lost in the fire.STEWART COMPANYComputation of Cost of Inventory Lost in FireJanuary 20, 2020Schedule 1 Inventory, July 1, 2019$fill in the blank 68d389046fae065_1Purchases (less $6,000 in transit)fill in the blank 68d389046fae065_2Less: Purchases returnsfill in the blank 68d389046fae065_3Less: Purchases discounts takenfill in the blank 68d389046fae065_4Freight-infill in the blank 68d389046fae065_5Cost of goods available for sale and on hand$fill in the blank 68d389046fae065_6Schedule 2 Sales$fill in the blank 68d389046fae065_7Less: Sales returnsfill in the blank 68d389046fae065_8Net sales$fill in the blank 68d389046fae065_9Schedule 3 Cost of goods sold$fill in the blank 68d389046fae065_10Cost of goods salvaged$fill in the blank 68d389046fae065_11Schedule 4 Inventory lost in the fire: Cost of goods available for sale and on hand$fill in the blank 68d389046fae065_12Less: Cost of goods soldfill in the blank 68d389046fae065_13Less: Cost of goods salvagedfill in the blank 68d389046fae065_14Inventory lost$fill in the blank 68d389046fae065_15 2. Next Level If a company discloses that it uses the inventory method, it is the ending inventory reported in its interim financial reports which may cause concern about the accuracy of the reported amounts.

Name: On January 20, 2020, Stewart Company’s records revealed the following
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Description: On January 20, 2020, Stewart Company’s records revealed the following information:Inventory, July 1, 2019$ 55,300Purchases, July 1, 2019–January 20, 2020382,100Sales, July 1, 2019–January 20, 2020592,000Purchases returns10,400Purchases discounts take

Inventory shows the current assets reported in the balance sheet.

Answered: On January 20, 2020, Stewart Company’s…

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

Chapter7: Inventories: Cost Measurement And Flow Assumptions

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Problem 13P: Webster Company adopted do liar-value LIFO on January 1, 2019. Webster produces three products: X,...

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On January 20, 2020, Stewart Company’s records revealed the following information:

Inventory, July 1, 2019	$ 55,300
Purchases, July 1, 2019–January 20, 2020	382,100
Sales, July 1, 2019–January 20, 2020	592,000
Purchases returns	10,400
Purchases discounts taken	6,800
Freight-in	3,500
Sales returns	6,600

A fire destroyed the entire inventory on January 20, 2020, except for purchases in transit, FOB shipping point of $6,000, and goods having a selling price of $4,700 that were salvaged from the fire. The salvaged goods had an estimated salvage value of $2,900. The average gross profit on net sales in previous periods was 40%.

Required:

1. Compute the cost of the inventory lost in the fire.

STEWART COMPANYComputation of Cost of Inventory Lost in FireJanuary 20, 2020

Schedule 1
Inventory, July 1, 2019	$fill in the blank 68d389046fae065_1
Purchases (less $6,000 in transit)	fill in the blank 68d389046fae065_2
Less: Purchases returns	fill in the blank 68d389046fae065_3
Less: Purchases discounts taken	fill in the blank 68d389046fae065_4
Freight-in	fill in the blank 68d389046fae065_5
Cost of goods available for sale and on hand	$fill in the blank 68d389046fae065_6
Schedule 2
Sales	$fill in the blank 68d389046fae065_7
Less: Sales returns	fill in the blank 68d389046fae065_8
Net sales	$fill in the blank 68d389046fae065_9
Schedule 3
Cost of goods sold	$fill in the blank 68d389046fae065_10
Cost of goods salvaged	$fill in the blank 68d389046fae065_11
Schedule 4
Inventory lost in the fire:
Cost of goods available for sale and on hand	$fill in the blank 68d389046fae065_12
Less: Cost of goods sold	fill in the blank 68d389046fae065_13
Less: Cost of goods salvaged	fill in the blank 68d389046fae065_14
Inventory lost	$fill in the blank 68d389046fae065_15

2. Next Level If a company discloses that it uses the

inventory method, it is

the ending inventory reported in its interim financial reports which may cause concern about the accuracy of the reported amounts.

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