5.1 Calculate: 5.1.1 Cost of the inventory destroyed in the fire. (5) 5.1.2 The amount to be claimed from the insurance company. (2) 5.1.3 Calculate the amount of inventory destroyed and the amount of the insurance claim assuming that the company had always earned a gross profit
For several years, Berry Limited has marked its purchases up by 33.33% and has
consistently realised the expected rate of gross profit. Its inventory was insured against
fire for R40 000, the policy being subject to the average clause.
A fire took place on 25 September and all inventory was destroyed except for items
which had cost R10 000 which were salvaged in an undamaged condition.
The following information was obtained from the firm’s ledger:
R
Inventory on hand at cost - 1 January 48 000
Purchases – 1 January to 25 September 182 000
Sales – 1 January to 25 September 240 000
The business has a financial year which ends on 31 December.
Required:
5.1 Calculate:
5.1.1 Cost of the inventory destroyed in the fire. (5)
5.1.2 The amount to be claimed from the insurance company. (2)
5.1.3 Calculate the amount of inventory destroyed and the amount of the insurance
claim assuming that the company had always earned a gross profit
of 33.33%. (8)
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