College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
22nd Edition
ISBN: 9781305666160
Author: James A. Heintz, Robert W. Parry
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 13, Problem 8SPA
To determine
Estimate the amount of merchandise inventory destroyed in the fire on August 5 using the gross profit method.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Gross Profit Method
A fire completely destroyed all the inventory of Glisan Lumber Yard on August 5, 20--. Fortunately, the accounting records were not destroyed in the fire. The following information is provided by Glisan Lumber Yard for the time period January 1 through August 5:
Beginning inventory, January 1, 20--
Â
$98,000
Net purchases, January 1 through August 5
Â
426,000
Net sales, January 1 through August 5
Â
721,000
Normal gross profit as a percentage of sales
Â
40%
Required:
Estimate the amount of merchandise inventory destroyed in the fire on August 5 using the gross profit method
$_____
Gross Profit Method
The inventory was destroyed by fire on December 31. The following data were obtained from the accounting records:
Jan. 1
Inventory
$350,000
Jan. 1 - Dec. 31
Purchases (net)
2,950,000
Â
Sales
4,440,000
Â
Estimated gross profit rate
35%
Â
a. Estimate the cost of the inventory destroyed.
Â
Estimated Cost of Merchandise Destroyed
Â
Â
Â
$
Â
Â
Â
Â
Â
$
Â
$
Â
Â
Â
Â
Â
Â
Â
Â
Â
$
b. Which method is used to estimate inventory cost in case of inventory destroyed by fire?
Gross Profit Method
A flood completely destroyed all the inventory of Bayside Waterworks Company on July 1, 20--. Fortunately, the accounting records were not destroyed in the flood. The following information is provided by Bayside Waterworks for the time period January 1 through July 1, 20--:
Beginning inventory, January 1, 20--
Â
$60,000
Net purchases, January 1 through July 1
Â
380,000
Net sales, January 1 through July 1
Â
650,000
Normal gross profit as a percentage of sales
Â
45%
Â
Required:
Estimate the amount of merchandise inventory destroyed in the flood on July 1 using the gross profit method.$fill in the blank 1
Chapter 13 Solutions
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
Ch. 13 - An overstatement of ending inventory in the year...Ch. 13 - An understatement of ending inventory in the year...Ch. 13 - LO2 Under the perpetual system of accounting for...Ch. 13 - LO3 A fiscal year that starts and ends at the time...Ch. 13 - LO3 If goods are shipped FOB shipping point, the...Ch. 13 - An understatement of ending inventory in the year...Ch. 13 - Prob. 2MCCh. 13 - In rimes of rising prices, the inventory cost...Ch. 13 - In rimes of rising prices, the inventory cost...Ch. 13 - In the application of lower-of-cost-or-market,...
Ch. 13 - LO1 If the ending inventory is overstated by...Ch. 13 - Using the following information, compute the...Ch. 13 - Use the following information to compute cost of...Ch. 13 - Kulsrud Company would like to estimate the current...Ch. 13 - What financial statements are affected by an error...Ch. 13 - What is the main difference between the periodic...Ch. 13 - Is a physical inventory necessary under the...Ch. 13 - Is a physical inventory necessary under the...Ch. 13 - In a period of rising prices, which inventory...Ch. 13 - What two factors are taken into account by the...Ch. 13 - Which inventory method always follows the actual...Ch. 13 - When lower-of-cost-or-market is assigned to the...Ch. 13 - List the three steps followed under the gross...Ch. 13 - List the five steps followed under the retail...Ch. 13 - INVENTORY ERRORS Assume that in year 1, the ending...Ch. 13 - JOURNAL ENTRIESPERIODIC INVENTORY Paul Nasipak...Ch. 13 - JOURNAL ENTRIESPERPETUAL INVENTORY Joan Ziemba...Ch. 13 - ENDING INVENTORY COSTS Sandy Chen owns a small...Ch. 13 - LOWER-OF-COST-OR-MARKET Stalberg Companys...Ch. 13 - SPECIFIC IDENTIFICATION, FIFO, LIFO, AND...Ch. 13 - COST ALLOCATION AND LOWER-OF-COST-OR-MARKET...Ch. 13 - Prob. 8SPACh. 13 - RETAIL INVENTORY METHOD The following information...Ch. 13 - INVENTORY ERRORS Assume that in year 1, the ending...Ch. 13 - JOURNAL ENTRIESPERIODIC INVENTORY Amy Douglas owns...Ch. 13 - JOURNAL ENTRIESPERPETUAL INVENTORY Doreen Woods...Ch. 13 - ENDING INVENTORY COSTS Danny Steele owns a small...Ch. 13 - LOWER-OF-COST-OR-MARKET Bouie Companys beginning...Ch. 13 - SPECIFIC IDENTIFICATION, FIFO, LIFO, AND...Ch. 13 - COST ALLOCATION AND LOWER-OF-COST-OR-MARKET Hall...Ch. 13 - GROSS PROFIT METHOD A flood completely destroyed...Ch. 13 - RETAIL INVENTORY METHOD The following information...Ch. 13 - Hurst Companys beginning inventory and purchases...Ch. 13 - Bhushan Company has been using LIFO for inventory...
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
- A fire on 28th Feb destroyed some of a company’s inventory and its inventory records. The following information is available:- Inventory at 1st Feb= 3,180- Sales for Feb= 6,120- Purchases for Feb =4,120- Inventory in good condition at 28th Feb= 2,140The standard gross profit percentage on sales is 35%.Based on this information, what is the value of the inventory lost?arrow_forwardOn February 7 of the following year,the merchandise inventory was destroyed by fire based on the following data obtained from the accounting records,estimate the cost of the merchandise destroyed: Jan 1 merchandise inventory 140,600 Jan 1-Feb 7 purchase (net) 38,000 Jan 1-Feb sales (net)........68,000 Estimated gross profit rate ....40%arrow_forward(Gross Profit Method) Tim Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $38,000. Purchases since January 1 were $72,000; freight-in, $3,400; purchase returns and allowances, $2,400. Sales are made at 331/3% above cost and totaled $100,000 to March 9. Goods costing $10,900 were left undamaged by the fire; remaining goods were destroyed.Instructions(a) Compute the cost of goods destroyed.(b) Compute the cost of goods destroyed, assuming that the gross profit is 331/3% of sales.arrow_forward
- A fire destroyed a warehouse of the Goren Group, Inc., on May 4, 2021. Accounting records on that date indicated the following: Merchandise inventory, January 1, 2021                    $1,900,000Purchases to date                                       5,800,000Freight-in                                              400,000Sales to date                                           8,200,000 The gross profit ratio has averaged 20% of sales for the past four years.Required:Use the gross profit method to estimate the cost of the inventory destroyed in the fire.arrow_forwardA fire destroyed the warehouse of Reed Enterprises, on August 31, 20Y1. The books and records of Reed showed the following information on that date. Merchandise Inventory. Jan. 1, 20Y1 $600,000​ Purchases to date 990,000 Freight - In 30,000 Sales to date $2,400,000​ The gross profit ratio has averaged 60 % of sales for the past six years.Required:Use the gross profit method to estimate the cost of inventory destroyed by fire. Group of answer choices $660,000 $1,590,000 $1,620,000 $960,000arrow_forwardSunland Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $44,840. Purchases since January 1 were $84,960; freight-in, $4,012; purchase returns and allowances, $2,832. Sales are made at 33 1/3% above cost and totaled $138,000 to March 9. Goods costing $12,862 were left undamaged by the fire; remaining goods were destroyed.arrow_forward
- ASAP!! The merchandise inventory of Ayan & Co. was destroyed by fire on 4th May 2021. The following data were obtained from the accounting record: Opening Inventory         1,120,000 Purchases         1,056,000 Purchases Returned & Allowance               52,000 Sales         2,870,000 Sales Return & Allowance                 8,000 Estimated Gross Profit Rate 41%  Required Compute the estimated cost of merchandise inventory destroyed by firearrow_forwardOn 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 destroyedarrow_forwardNordman Lumber Company handles two principal lines of mechandise        with the associated gross profit shown below:                Lumber 52%       Millwork 53%               On August 25, a fire destroyed the office and a considerable portion of        the lumber and millwork inventory stacked in the yard. To file a loss for        insurance purposes, the company must know what the inventories were        immediately preceeding the fire. No detail or perpetual inventory records        were available after the fire except the following general ledger information        which was kept in a fireproof vault.                   Lumber Millwork    Inventory, January 1   $455,000 $360,000    Purchases up to August 25   $1,530,000 $920,000    Sales up to August 25   $2,595,000 $995,000            Using the gross profit method for…arrow_forward
- Blossom Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $39,520. Purchases since January 1 were $74,880; freight-in, $3,536; purchase returns and allowances, $2,496. Sales are made at 33 1/3% above cost and totaled $117,000 to March 9. Goods costing $11,336 were left undamaged by the fire; remaining goods were destroyed. Compute the cost of goods destroyed = ? Compute the cost of goods destroyed, assuming that the gross profit is 33 1/3% of sales = ?arrow_forwardThe 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 dollarsarrow_forwardThe 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 dollarsarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage