Question

On April 15, 2021, fire damaged the office and warehouse of Whispering Corporation. The only accounting...

On April 15, 2021, fire damaged the office and warehouse of Whispering Corporation. The only accounting record saved was the general ledger, from which the balance sheet data below was prepared.

WHISPERING CORPORATION
MARCH 31, 2021

Cash

$21,860

Accounts receivable

43,040

Inventory, December 31, 2020

77,390

Land

31,880

Buildings

118,120

Accumulated depreciation

$37,414

Equipment

3,738

Accounts payable

22,698

Other accrued expenses

35,483

Common stock

90,800

Retained earnings

56,770

Sales revenue

134,410

Purchases

56,770

Miscellaneous expense

24,777

$377,575

$377,575


The following data and information have been gathered.

1. The fiscal year of the corporation ends on December 31.
2. An examination of the April bank statement and canceled checks revealed that checks written during the period April 1–15 totaled $11,960: $5,734 paid to accounts payable as of March 31, $3,585 for April merchandise shipments, and $3,546 paid for other expenses. Deposits during the same period amounted to $13,442, which consisted of receipts on account from customers with the exception of a $859 refund from a vendor for merchandise returned in April.
3. Correspondence with suppliers revealed unrecorded obligations at April 15 of $16,393 for April merchandise shipments, including $2,454 for shipments in transit (f.o.b. destination) on that date.
4. Customers acknowledged indebtedness of $44,440 at April 15, 2021. It was also estimated that customers owed another $7,790 that will never be acknowledged or recovered. Of the acknowledged indebtedness, $578 will probably be uncollectible.
5. The companies insuring the inventory agreed that the corporation’s fire-loss claim should be based on the assumption that the overall gross profit rate for the past 2 years was in effect during the current year. The corporation’s audited financial statements disclosed this information:

Year Ended
December 31

2020

2019

Net sales $498,340 $392,400
Net purchases 283,010 256,220
Beginning inventory 50,000 64,990
Ending inventory 77,390 50,000
6. Inventory with a cost of $7,340 was salvaged and sold for $3,810. The balance of the inventory was a total loss.


Compute the amount of inventory fire loss. (Round ratios for computational purposes to 2 decimal places, e.g 78.52% and final answer to 0 decimal places, e.g. 28,987.)

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