Question

Oriole Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. Corporate records disclose the following. Inventory (beginning) $ 79,700 Sales revenue $414,200 Purchases 285,800 Sales returns 21,400 Purchase returns 27,700 Gross profit % based on net selling price 33 % Merchandise with a selling price of $29,400 remained undamaged after the fire, and damaged merchandise has a net realizable value of $8,000. The company does not carry fire insurance on its inventory. Compute the amount of inventory fire loss. (Do not use the retail inventory method.) Inventory fire loss $

Answer 1

Beginning inventory		79700
Purchases		285800
		365500
Purchase returns		-27700
Goods available (at cost)		337800
Sales revenue	414200
Sales returns	-21400
Net sales	392800
Less: Gross profit (33% X $392,800)	-129624
Cost of goods sold		263176	=392800-129624
Estimated ending inventory		74624	=337800-263176
Less: Goods on hand—undamaged (at cost)		-19698	=29400*(1-33%)
Less: Goods on hand—damaged (at net realizable value)		-8000
Inventory fire loss		46926	=74624-19698-8000