Question

Sage Company lost most of its inventory in a fire in December just before the year-end...

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

Homework Answers

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
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