Question

Sage 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) $ 79,600 Sales revenue $409,400 Purchases 295,600 Sales returns 21,300 Purchase returns 27,600 Gross profit % based on net selling price 38 % Merchandise with a selling price of $30,200 remained undamaged after the fire, and damaged merchandise has a net realizable value of $8,200. 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		79600
Purchases		295600
Less: Purchase returns		-27600
Total goods available for sale		347600
Sales revenue	409400
Less: Sales returns	-21300
Net sales	388100
Less: Gross profit	-147478		=388100*38%
Cost of goods sold		240622
Ending inventory		106978	=347600-240622
Less: Cost of Goods on hand—undamaged		18724	=30200*(1-38%)
Less: Salvage value of damaged inventory		8200
Inventory fire loss		80054	=106978-18724-8200