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
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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