A flood destroyed a company's warehouse contents on September 12. The following information was the only information that was salvaged:1. Inventory, beginning: $28,2002. Purchases for the period: $17,2003. Sales for the period: $55,2004. Sales returns for the period: $720The company's average gross profit ratio is 37%. What is the estimated cost of the lost inventory using the gross profit method?Multiple Choice$11,077.60.$25,242.40.$28,602.00.$45,400.00.$44,400.00.

The formual for ending inventory is as follows:

Answered: A flood destroyed a company's warehouse…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Estimating Inventory Loss Using Gross Profit Method On November 15, a fire destroyed Youngstown Inc.'s warehouse where inventory is stored. It is estimated that $12,000 can be realized from sale of usable but damaged inventory. The accounting records concerning inventory reveal the following. Gross profit averaged 35% of net sales. Inventory at Nov. 1 Purchases from Nov. 1 to Nov. 15 Net sales from Nov. 1 to Nov. 15 $144,000 168,000 240,000 Required a. Calculate the estimated loss of inventory using the gross profit method. $ 144,000 b. Assume instead that the markup is 25% of cost. Estimate the loss of inventory using the gross profit method. $ 120,000 X
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ABC Company purchased machinery for $50,000 with an estimated useful life of 5 years and salvage value of $5,000. Using straight-line depreciation, what is the annual depreciation expense? a) $9,000 b) $10,000 c) $8,000 d) $11,000
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Strand Corp lost its inventory in a fire and they have asked you to calculate the value of Ending Inventory based on the following info: Beg Inv $260,000, Sales $1,050,000, Purchases $395,000, Sales returns $50,000, Purchase returns $35,000. Average Gross Profit margin 55%
Problems Problem 1 Gross Margin Method: Inventory Burned, Indemnity. Word Wholesale Company's warehouse burned on April 1, 20X5. The following information (up to the date of the fire) was taken from the records of the company; inventory, January 1, P30,0003; gross sales, P160,000; purchases, P90,000%3; sales returns (restored to stock), P5,000; purchase returns and allowances, P2,000; and freight-in, P8,000. The cost of goods sold and gross margin for the past three years were: Cost of Goods Sold P500,000 460,000 500,000 Gross Margin P125,000 120,000 120,000 Year 20X2 20X3 20X4 Required: 1. Estimate the cost of the inventory destroyed in the fire. 2. Under what conditions would your response to (1) above be questionable? 3. The insurance company pays indemnity on market value at the date of the fire. What amount would you recommend that Word submit as an insurance claim? Explain.
Instructions Long Horn Music Store uses a perpetual inventory system and had the following transactions during July. 1 Sold merchandise on account for $1,475. The cost of inventory sold was $785. 4 Purchased $1,500 of inventory, paying $1,000 cash with the remainder on account. 7 Sold equipment that cost $1,900 for $2,300. The equipment was fully depreciated and had no salvage value. 10 Paid wages of $1,250 and salaries of $3,250. Neither had been previously accrued. 12 Sold merchandise for $4,450 cash and for $3,250 on account. The cost of inventory sold was $4,050. 18 Purchased new equipment for $3,780, paying $1,780 cash and signing a 90-day note for the remainder. 24 Sold merchandise for $1,235 cash. The cost of inventory sold was $650. Paid wages of $1,470 and salaries of $3,250. Neither had been previously accrued. 29 Paid the July 4 invoice on account. Required: Record the preceding transactions in a general journal. Chart of Accounts
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Errors in Inventory Counts The following information was taken from the records of Tinker Enterprises: Year 2 Year 1 $105,000 $126,000 Beginning Inventory Cost of goods purchased 840,000 882,000 Cost of goods available for sale 945,000 1,008,000 126,000 115,500 $819,000 $892,500 Ending inventory Cost of goods sold The following two errors were made in the physical inventory counts: 1. Year 1 ending inventory was understated by $16,800 2. Year 2 ending inventory was overstated by $8,400 Compute the correct cost of goods sold for both years. Year 1 Year 2 Cost of goods sold $ 802,200 $ 0
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