Question

You are called by Tim Duncan of Headland 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		$ 38,200
Purchases—goods placed in stock July 1–15		80,300
Sales revenue—goods delivered to customers (gross)		124,800
Sales returns—goods returned to stock		4,400

Your client reports that the goods on hand on July 16 cost $29,400, but you determine that this figure includes goods of $5,500 received on a consignment basis. Your past records show that sales are made at approximately 30% over cost. Duncan’s insurance covers only goods owned.

Compute the claim against the insurance company. (Round ratios for computational purposes to 2 decimal places, e.g. 78.73% and final answer to 0 decimal places, e.g. 28,987.)

Claim against the insurance company

$

Answer 1

Answer : Claim against the insurance company = $ 1985

Working :

Net sales = Sales revenue - sales return

Net sales = 124800 - 4400

Net sales = 120400

Cost of goods sold = Net sales / 130% over cost

Cost of goods sold = 120400 / 130%

Cost of goods sold = 92615

Closing Inventory = Opening inventory + purchases - cost of goods sold

Closing Inventory = 38200+ 80300 - 92615

Closing Invnetory = 25885

Actual closing inventory = Goods in hand - Goods in consignment

Actual closing inventory = 29400 - 5500

Actual closing Inventory = 23900

Insurance claim = Closing Inventory - Actual closing inventory

Insurance claim = 25885 - 23900

Insurance Claim = 1985