Question

Smith Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2021, a fire resulted in the loss of all of the toppings stored in one section of the warehouse. The company must provide its insurance company with an estimate of the amount of inventory lost. The following information is available from the company's accounting records:

	Fruit Toppings			Marshmallow Toppings			Chocolate Toppings
Inventory, January 1, 2021	$	16,000		$	6,600		$	2,600
Net purchases through Nov. 17		130,000			32,000			11,600
Net sales through Nov. 17		180,000			51,000			19,600
Historical gross profit ratio		25	%		35	%		35	%

Required:
1. Calculate the estimated cost of each of the toppings lost in the fire

Answer 1

Answer
Particulars	Cost of each of the toppings
Fruit Toppings	11000
Marshmallow Toppings	5450
Chocolate Toppings	1460

• Caclulation is under

Particulars	Fruit Toppings ($)	Marshmallow Toppings ($)	Chocolate Toppings ($)
Estimate of cost of goods sold :
Cost percentage	75%	65%	65%
* Net Sales	180000	51000	19600
Estimate of cost of goods sold (Cost percentage * net sales)	135000	33150	12740
Beginning inventory	16000	6600	2600
Add : Net purchase	130000	32000	11600
cost of goods Avalibale for sold	146000	38600	14200
Less: Estimate of cost of goods sold	135000	33150	12740
Estimate of cost of goods sold Ending	11000	5450	1460

Note

Cost Percentage = Sales Percent - Gross profit percent

Fruit Toppings	100%- 25% = 75%
Marshmallow Toppings	100%- 35% = 65%
Chocolate Toppings	100% - 35% = 65%