Question

Carla Lumber Company handles three principal lines of merchandise with these varying rates of gross profit...

Carla Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost.

Lumber 25%
Millwork 30%
Hardware and fittings 40%


On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were maintained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction.

Lumber

Millwork

Hardware

Inventory, Jan. 1, 2017 $248,700 $88,200 $44,100
Purchases to Aug. 18, 2017 1,529,500 368,800 161,900
Sales to Aug. 18, 2017 2,104,000 578,500 198,800


Submit your estimate of the inventory amounts immediately preceding the fire.

Homework Answers

Answer #1

Computation of estimated of the inventory amounts as August 18 (ie on immediately preceding the fire)

Lumber Millwork Hardware
Beginning Inventory, Jan. 1, 2017 $248,700 $88,200 $44,100
Add : Purchases to Aug. 18, 2017 $1,529,500 $368,800 $161,900
Cost of goods available for sales $1,778,200 $457,000 $206,000
Less : Cost of goods sold : [Sales / (1+ gross profit)

($1,683,200)

[$2,104,000 / 1.25]

($445,000)

[$578,500/1.30]

($142,000)

[$198,800/1.40]

Estimated inventory as on August 18 $95,000 $12,000 $64,000
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