Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 8, Problem 10E
Gross Profit Method: Estimation of Theft Loss You are requested by a client on September 28 to prepare an insurance claim for a theft loss that occurred on that day. You immediately take an inventory and obtain the following data:
The inventory on September 28 indicates that an inventory of $15,000 remains after the theft. During the past year, net sales were made at 50% above the cost of goods sold.
Required:
- 1. Compute the inventory lost during the theft. Round the gross profit percentage to 3 decimal places.
- 2. Next Level What concerns might you have about the inventory estimation under the gross profit method?
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An inventory taken the morning after a large theft discloses P60, 000 of goods on hand as of March 12. The following additional data is available from the books:
Inventory on hand, March 1
P84,000
Purchases received, March 1 – 11
P63,000
Sales (goods delivered to customers)
P120,000
Estimate the inventory of goods on hand at the close of business on March 11 by the gross profit method and determine the amount of the theft loss. Show appropriate titles for all amounts in your presentation.
Past records indicate that sales are made at 25% above sales.
Answer:
Beginning Inventory
Add Purchases
Goods Available
Goods Sold
Estimated Ending Inventory
Physical Inventory
Theft Loss
(Gross Profit Method) You are called by Tim Duncan of Spurs Co. on July 16 and asked to prepare a claim for insurance as a result of a theft that took place the night before. You suggest that an inventory be taken immediately. The following data are available.
Inventory, July 1 :$ 38,000Purchases—goods placed in stock July 1–15: 85,000Sales revenue—goods delivered to customers (gross): 116,000Sales returns—goods returned to stock: 4,000
Your client reports that the goods on hand on July 16 cost $30,500, but you determine that this figure includes goods of $6,000 received on a consignment basis. Your past records show that sales are made at approximately 40% over cost. Duncan’s insurance covers only goods owned.InstructionsCompute the claim against the insurance company.
You are requested by a client on September 28 to prepare an insurance claim for a theft loss that occurred on that day. You immediately take an inventory and obtain the following data:
1. Compute the inventory lost during the theft. Round the gross profit percentage to 3 decimal places. 2. Next Level What concerns might you lhave about the inventory estimation under the gross profit method?
Chapter 8 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 8 - Under what circumstances will a company value...Ch. 8 - What is the conceptual justification for reducing...Ch. 8 - Define the terms cost, net realizable value, and...Ch. 8 - For companies that use either LIFO or the retail...Ch. 8 - What three implementation approaches may a company...Ch. 8 - Describe the two approaches to recording the...Ch. 8 - Prob. 7GICh. 8 - In applying the inventory valuation rules to...Ch. 8 - Prob. 9GICh. 8 - What are the exceptions to historical cost...
Ch. 8 - Prob. 11GICh. 8 - Prob. 12GICh. 8 - What is the basic assumption underlying the gross...Ch. 8 - Prob. 14GICh. 8 - Prob. 15GICh. 8 - Explain the meaning of the following terms:...Ch. 8 - Prob. 17GICh. 8 - Prob. 18GICh. 8 - The retail inventory method indicated an inventory...Ch. 8 - Prob. 20GICh. 8 - Indicate the effect of each of the following...Ch. 8 - Sienna Company uses the FIFO cost flow assumption....Ch. 8 - Moore Company uses the LIFO cost flow assumption...Ch. 8 - A company uses the LIFO cost flow assumption. The...Ch. 8 - Prob. 4MCCh. 8 - Hestor Companys records indicate the following...Ch. 8 - Under the retail inventory method, freight-in...Ch. 8 - The retail inventory method would include which of...Ch. 8 - At December 31, 2019, the following information...Ch. 8 - Estimates of price-level changes for specific...Ch. 8 - A company forgets to record a purchase on credit...Ch. 8 - Brown Company has the following information...Ch. 8 - Black Corporation uses the LIFO cost flow...Ch. 8 - Blue Corporation uses the FIFO cost flow...Ch. 8 - Paul Corporation uses FIFO and reports the...Ch. 8 - Using the information provided in RE8-4, prepare...Ch. 8 - Kays Beauty Supply uses the gross profit method to...Ch. 8 - Uncle Butchs Hunting Supply Shop reports the...Ch. 8 - Use the information in RE8-7. Calculate Uncle...Ch. 8 - Use the information in RE8-7. Calculate Uncle...Ch. 8 - Use the information in RE8-7. Calculate Uncle...Ch. 8 - Johnson Corporation had beginning inventory of...Ch. 8 - Borys Companys periodic inventory at December 31,...Ch. 8 - Refer to the information provided in RE8-4. If...Ch. 8 - Refer to the information provided in RE8-4. If...Ch. 8 - Inventory Write-Down Stiles Corporation uses the...Ch. 8 - Inventory Write-Down Stiles Corporation uses the...Ch. 8 - Inventory Write-Down Byron Company has five...Ch. 8 - Inventory Write-Down The following information for...Ch. 8 - Inventory Write-Down The following information is...Ch. 8 - Inventory Write-Down The inventories of Berry...Ch. 8 - Prob. 7ECh. 8 - Gross Profit Method: Estimation of Flood Loss On...Ch. 8 - Prob. 9ECh. 8 - Gross Profit Method: Estimation of Theft Loss You...Ch. 8 - Retail Inventory Method Harmes Company is a...Ch. 8 - Retail Inventory Method The following data were...Ch. 8 - Retail Inventory Method The following information...Ch. 8 - Dollar-Value LIFO Retail Johns Company adopts the...Ch. 8 - Dollar-Value LIFO Retail Wyatt Company adopts the...Ch. 8 - Dollar-Value LIFO Retail On December 31, 2018,...Ch. 8 - Errors A company that uses the periodic inventory...Ch. 8 - Errors During the course of your examination of...Ch. 8 - (Appendix 8.1) Inventory Write-Down The...Ch. 8 - Inventory Write-Down Palmquist Company has five...Ch. 8 - Inventory Write-Down The following are the...Ch. 8 - Inventory Write-Down The inventory records of...Ch. 8 - Gross Profit Method: Estimation of Fire Loss On...Ch. 8 - Gross Profit Method: Estimation of Flood Loss On...Ch. 8 - Retail Inventory Method Turner Corporation uses...Ch. 8 - Retail Inventory Method EKC Company uses the...Ch. 8 - Retail Inventory Method Red Department Store uses...Ch. 8 - Retail Inventory Method Weber Corporation uses the...Ch. 8 - Dollar-Value LIFO Retail The following information...Ch. 8 - Dollar-Value LIFO Retail Intella Inc. adopted the...Ch. 8 - Prob. 12PCh. 8 - Errors As controller of Lerner Company, which uses...Ch. 8 - Comprehensive: Inventory Adjustments Layne...Ch. 8 - (Appendix 8.1) Inventory Write-Down The following...Ch. 8 - (Appendix 8.1) Inventory Write-Down Frost Companys...Ch. 8 - Prob. 1CCh. 8 - Sandberg Paint Company, your client, manufactures...Ch. 8 - Prob. 3CCh. 8 - Inventory Valuation Issues Hanlon Company...Ch. 8 - Gross Profit Shelly Corporation is an importer and...Ch. 8 - Prob. 6CCh. 8 - Prob. 7CCh. 8 - Various Inventory Issues Hudson Company, which is...Ch. 8 - Analyzing Starbucks Inventory Disclosures Obtain...Ch. 8 - Analyzing Moet Hennessy Louis Vuittons (LVMH)...
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