Question

Problem 9-07 On April 15, 2021, fire damaged the office and warehouse of Wildhorse Corporation. The...

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
MARCH 31, 2021

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:

Year Ended
December 31

2020

2019

Net sales $547,260 $373,770
Net purchases 287,780 240,970
Beginning inventory 46,800 64,100
Ending inventory 72,870 46,800
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 $

Homework Answers

Answer #1
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

THANK YOU!!

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