Problem 9-07
On April 15, 2021, fire damaged the office and warehouse of Wildhorse Corporation. The only accounting record saved was the general ledger, from which the balance sheet data below was prepared.
WILDHORSE CORPORATION |
||
Cash |
$21,180 |
|
Accounts receivable |
38,980 |
|
Inventory, December 31, 2020 |
72,870 |
|
Land |
36,180 |
|
Buildings |
115,250 |
|
Accumulated depreciation |
$44,388 |
|
Equipment |
3,811 |
|
Accounts payable |
24,794 |
|
Other accrued expenses |
1,640 |
|
Common stock |
103,800 |
|
Retained earnings |
56,140 |
|
Sales revenue |
139,600 |
|
Purchases |
56,140 |
|
Miscellaneous expense |
25,951 |
|
$370,362 |
$370,362 |
The following data and information have been gathered.
1. | The fiscal year of the corporation ends on December 31. | |||||||||||||||||||||||||||||||
2. | An examination of the April bank statement and canceled checks revealed that checks written during the period April 1–15 totaled $12,870: $6,094 paid to accounts payable as of March 31, $3,328 for April merchandise shipments, and $3,886 paid for other expenses. Deposits during the same period amounted to $13,595, which consisted of receipts on account from customers with the exception of a $910 refund from a vendor for merchandise returned in April. | |||||||||||||||||||||||||||||||
3. | Correspondence with suppliers revealed unrecorded obligations at April 15 of $16,205 for April merchandise shipments, including $2,509 for shipments in transit (f.o.b. destination) on that date. | |||||||||||||||||||||||||||||||
4. | Customers acknowledged indebtedness of $47,910 at April 15, 2021. It was also estimated that customers owed another $8,340 that will never be acknowledged or recovered. Of the acknowledged indebtedness, $568 will probably be uncollectible. | |||||||||||||||||||||||||||||||
5. | The companies insuring the inventory agreed that the corporation’s fire-loss claim should be based on the assumption that the overall gross profit rate for the past 2 years was in effect during the current year. The corporation’s audited financial statements disclosed this information: | |||||||||||||||||||||||||||||||
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6. | Inventory with a cost of $7,370 was salvaged and sold for $3,520. The balance of the inventory was a total loss. |
Compute the amount of inventory fire loss. (Round
ratios for computational purposes to 2 decimal places, e.g 78.52%
and final answer to 0 decimal places, e.g.
28,987.)
Inventory fire loss | $ |
PARTICULARS | AMOUNT |
Opening inventory,2021 |
72870 |
Add:Purchases | 56140 |
Add:shipment charges | 3328 |
Add;Urecorded obligations | 16205 |
Less:Shipment in transit | 2509 |
Les:Return of merchandise | 910 |
Merchandise available for sale | 145125 |
Less: Cost og goods sold | 95731 |
Estimated inventory | 49394 |
Less:Salvage value | 3520 |
Inventory fire loss |
45870 |
Workings:
PARTICULARS | DEBIT | CREDIT |
Net sales 2019 | 373770 | |
Net sales 2020 | 547260 | |
Total sales | 921031 | |
Beginning inventory,2019 | 64100 | |
Purchases, 2019 | 240970 | |
Purchases, 2020 | 287780 | |
Less:Ending inventory, 2020 | 72870 | |
cost of goods sold | 519980 | |
Gross profit |
401051 |
Gross profit percentage=Gross profit/Total sales*100
=401051/921031*100
=43.54%
Estimated sales revenue | 139600 |
Recivables acknowledged | 47910 |
Recivables not acknowledged | 8340 |
collections from receivables(13595-910) | 12685 |
Less:Accounts receivable | 38980 |
Total sales | 169555 |
Less:Gross [email protected] | 73824 |
Cost of goods sold | 95731 |
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