INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
9th Edition
ISBN: 9781260216141
Author: SPICELAND
Publisher: MCG CUSTOM
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Chapter 9, Problem 9.10E
To determine
Gross Profit Method: Under this method, the beginning inventory is added to the net purchases during the period which results in the goods available for sale. Then, the estimated cost of goods sold is deducted from the goods available for sale to estimate the ending inventory.
To Estimate: the cost of the inventory destroyed in the fire using the gross profit method.
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PROBLEM 17
On January 15, 2020, a strong monsoon hit the country and destroyed all the inventory of Aeirron
Company stored in the warehouse. The following information is available from the records of the
company's periodic inventory system:
ww
Beginning inventory
Purchases, January1 to January 15, 2020
Sales, January 1 to January 15, 2020
P1,000.000
500,000
800,000
The following are the past performance of Aeirron Company:
2019
2018
Sales
P4,500,000
P4,100,000
Cost of Sales
2,300,000
2,500,000
Requirements:
1. Compute the gross profit rate of the company for the pastyears.
2. Compute the inventory lost in monsoon.
PROBLEM 17: The following information relates to NNN , Inc. which accidentally met a fire on the night of January 19, 2023:
Inventory, July 1, 2022 P 51,600
Purchases, July 1, 2022 to January 19, 2023 368,000
Sales, July 1, 2022 to January 19, 2023 583,000
Purchase returns 11,200
Purchase discounts taken 5,800
Freight in 3,800
Sales returns 8,600
The fire destroyed the entire inventory except for purchases in transit, FOB shipping point of P2,000 and goods having selling price of P4,900 that were salvaged from the fire. The average gross profit rate on net sales is 40%.
22. Compute for the cost of inventory lost in the fire.
PROBLEM 16: On May 6, 2023, a flashflood caused damage to the merchandise stored in the
warehouse of Rome Company. You were asked to submit an estimate of the merchandise
destroyed in the warehouse. The following data were established:
A. Net sales for 2022 were P800,000 matched against cost of P560,000.
B. Merchandise inventory, January 1, 2023 was P200,000, 90% of which was in the
warehouse and 10% in the downtown showrooms.
C. For January 1, 2023 to date of flood, you ascertained that the invoice value of
purchases, all of which were stored in the warehouse, P100,000; freight inward, P4,000;
purchases retumed, P6,000.
D. Cost of merchandise transferred from the warehouse to showrooms was P8,000 and
net sales from January 1 to May 6. 2023, all of which were warehouse stock, were
P320,000.
E. There was no change in the gross profit rate adopted by the company in 2023.
21. What is the estimated merchandise destroyed by the flood?
PROBLEM 17: The following information relates to NNN ,…
Chapter 9 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
Ch. 9 - Explain the (a) lower of cost or net realizable...Ch. 9 - What are the various levels of aggregation to...Ch. 9 - Describe the alternative approaches for recording...Ch. 9 - Explain the gross profit method of estimating...Ch. 9 - The Rider Company uses the gross profit method to...Ch. 9 - Explain the retail inventory method of estimating...Ch. 9 - Both the gross profit method and the retail...Ch. 9 - Define each of the following retail terms: initial...Ch. 9 - Explain how to estimate the average cost of...Ch. 9 - Prob. 9.10Q
Ch. 9 - Explain the LIFO retail inventory method.Ch. 9 - Discuss the treatment of freight-in, net markups,...Ch. 9 - Explain the difference between the retail...Ch. 9 - Prob. 9.14QCh. 9 - Prob. 9.15QCh. 9 - Explain the accounting treatment of material...Ch. 9 - It is discovered in 2018 that ending inventory in...Ch. 9 - Identify any differences between U.S. GAAP and...Ch. 9 - (Based on Appendix 9) Define purchase commitments....Ch. 9 - (Based on Appendix 9) Explain how purchase...Ch. 9 - Lower of cost or net realizable value LO91 Ross...Ch. 9 - Lower of cost or net realizable value LO91 SLR...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.5BECh. 9 - Gross profit method; solving for unknown LO92...Ch. 9 - Retail inventory method; average cost LO93 Kiddie...Ch. 9 - Retail inventory method; LIFO LO93 Refer to the...Ch. 9 - Conventional retail method LO94 Refer to the...Ch. 9 - Conventional retail method LO94 Roberson...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Dollar-value LIFO retail LO95 This exercise is a...Ch. 9 - Change i n inventory costing methods LO96 In...Ch. 9 - Change in inventory costing methods LO96 In 2018,...Ch. 9 - Inventory error LO97 In 2018, Winslow...Ch. 9 - Inventory error LO97 Refer to the situation...Ch. 9 - Lower of cost or net realizable value LO91 Herman...Ch. 9 - Lower of cost or net realizable value LO91 The...Ch. 9 - Lower of cost or net realizable value LO91 Tatum...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.8ECh. 9 - Prob. 9.9ECh. 9 - Prob. 9.10ECh. 9 - Gross profit method LO92 Royal Gorge Company uses...Ch. 9 - Prob. 9.12ECh. 9 - Retail inventory method; average cost LO93 San...Ch. 9 - Prob. 9.14ECh. 9 - Retail inventory method; LIFO LO93 Crosby Company...Ch. 9 - Prob. 9.16ECh. 9 - Conventional retail method; employee discounts ...Ch. 9 - Retail inventory method; solving for unknowns ...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Prob. 9.20ECh. 9 - Dollar-value LIFO retail LO95 Lance-Hefner...Ch. 9 - Prob. 9.22ECh. 9 - Change in inventory costing methods LO96 In 2018,...Ch. 9 - Prob. 9.24ECh. 9 - Error correction; inventory error LO97 During...Ch. 9 - Prob. 9.26ECh. 9 - Inventory error LO97 In 2018, the internal...Ch. 9 - Inventory errors LO97 In 2018, the controller of...Ch. 9 - Concepts; terminology LO91 through LO97 Listed...Ch. 9 - Prob. 9.30ECh. 9 - Prob. 9.31ECh. 9 - Lower of cost or net realizable value LO91 Decker...Ch. 9 - Prob. 9.2PCh. 9 - Lower of cost or market LO91 Forester Company has...Ch. 9 - Prob. 9.4PCh. 9 - Prob. 9.5PCh. 9 - Prob. 9.6PCh. 9 - Retail inventory method; conventional and LIFO ...Ch. 9 - Prob. 9.8PCh. 9 - Prob. 9.9PCh. 9 - Dollar-value LIFO retail method LO95 [This is a...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Retail inventory method; various applications ...Ch. 9 - Retail inventory method; various applications ...Ch. 9 - Prob. 9.14PCh. 9 - Inventory errors LO97 You have been hired as the...Ch. 9 - Inventory errors LO97 The December 31, 2018,...Ch. 9 - Integrating problem; Chapters 8 and 9; inventory...Ch. 9 - Purchase commitments Appendix In November 2018,...Ch. 9 - Judgment Case 91 Inventoriable costs; lower of...Ch. 9 - Integrating Case 93 FIFO and lower of cost or net...Ch. 9 - Prob. 9.4BYPCh. 9 - Prob. 9.5BYPCh. 9 - Prob. 9.6BYPCh. 9 - Prob. 9.7BYPCh. 9 - Real World Case 98 Various inventory issues;...Ch. 9 - Prob. 9.9BYPCh. 9 - Judgment Case 910 Inventory errors LO97 Some...Ch. 9 - Ethics Case 911 Overstatement of ending inventory ...Ch. 9 - Analysis Case 912 Purchase commitments Appendix...Ch. 9 - Continuing Cases Target Case LO93, LO94, LO95...Ch. 9 - Prob. 1CCIFRS
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- A fire destroys all of the merchandise of Bonita Company on February 10, 2025. Presented below is information compiled up to the date of the fire. Inventory, January 1, 2025 Sales revenue to February 10, 2025 Purchases to February 10, 2025 Freight-in to February 10, 2025 Rate of gross profit on selling price $396,800 Inventory at February 10, 2025 $ 1,923,000 1,212,460 65,070 40% What is the approximate inventory on February 10, 2025?arrow_forwardE6.18 modified The inventory of Ipswich Books was destroyed by fire on March 1. From an examination of the accounting records, the following data for the first two months of the year are obtained: Sales revenue $51,000, Sales returns and allowances $1,000, Purchases $31,200, Freight-in $1,200, and Purchase returns and allowances $1,800. Determine the merchandise lost by fire, assuming: a. A beginning inventory of $20,000 and a gross profit rate of 40% on net sales. b. A beginning inventory of $30,000 and gross profit rate of 25% on costarrow_forwardPROBLEM 40: 000 Company uses the retail inventory method. At the end of the current year, 000 Company suffered a fire loss that destroyed most of its inventory. After the fire, only goods with a selling price of P125,000, a cost of P100,000 and a net realizable value of P75,000 was salvaged. The following information is available prior to the fire: Cost Retail P 1,100,000 15,800,000 540,000 600,000 300,000 400,000 Beginning inventory Purchases P 2,200,000 26,300,000 Freight in Purchase returns Purchase allowances 1,000,000 800,000 300,000 100,000 900,000 800,000 50,000 24,700,000 350,000 200,000 100,000 600,000 5% of sales Departmental transfer in Markups Cancelation of markdown Departmental transfer out Markdowns Cancelation of markup Sales Sales returns Sales discounts 350,000 Sales allowances Employee disCounts Normal wastage 33. What is the estimated fire loss if O0O Company applies the conservative retail approach? 34. What is the estimated cost of goods sold if OO 0 Company…arrow_forward
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