**ACC 301 – Gross Profit Method**Raynor Company lost most of its inventory in a fire just before the company was to take its year-end physical inventory. The company's records disclosed the following:- **Beginning Inventory:** 80,000- **Purchases:** 290,000- **Purchase Returns:** 28,000- **Sales Revenue:** 415,000- **Sales Returns:** 21,000- **Gross Profit Based on Selling Price:** 35%Merchandise with a selling price of $80,000 was not damaged by the fire. The damaged merchandise has a net realizable value of $8,150.**Required:**Prepare a schedule computing the fire loss. *(Do not use the retail inventory method.)*---In this problem, students are expected to compute the estimated fire loss by utilizing the gross profit method. The gross profit method helps estimate ending inventory and cost of goods sold when part of the inventory records is destroyed or unavailable.

Cost of goods sold means the cost of goods which has been actually sold out during the year. When we…

Answered: ACC 301 Gross Profit Method Raynor…

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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Current Attempt in Progress Bonita Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. The corporation's books disclosed the following. Beginning inventory $178,300 Sales revenue $607,900 Purchases for the year 355,000 Sales returns 21,600 Purchase returns 27,700 Rate of gross profit on net sales 30 % Merchandise with a selling price of $21,000 remained undamaged after the fire. Damaged merchandise with an original selling price of $15,500 had a net realizable value of $5,300. Compute the amount of the loss as a result of the fire, assuming that the corporation had no insurance coverage. Amount of the loss $
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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Riverbed Inc.’s April 30 inventory was destroyed by the explosion of an underground oil tank. January 1 inventory was $322,000 and purchases for January through April totalled $790,000. Sales for the same period were $1.2 million. Riverbed 's normal gross profit percentage is 30%.Using the gross profit method, estimate the amount of Riverbed 's April 30 inventory that was destroyed. Estimated ending inventory destroyed in explosion $enter a dollar amount of the ending inventory
Question VI - On January 20, 2011, the records of the Stewart Company revealed the following information: Purchases discounts taken $5,800 3,800 Freight-in Sales returns 6,600 Inventory, July 1, 2010 Purchases, July 1, 2010-January 20, 2011 Sales, July 1, 2010-January 20, 2011 Purchases returns $ 53,600 368,000 583,000 11,200 A fire destroyed the entire inventory on January 20, 2011 except for purchases in transit, FOB shipping point of $6,000, and goods having a selling price of $4,700 that were salvaged from the fire. The salvaged goods had an estimated cost of $2,900. The average gross profit on net sales in previous periods was 40%. 1. Compute the cost of the inventory lost in the fire.
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.
LO S Gross Profit Method E9A. David Patel was at home when he received a call from the fire department telling him his store had burned. His business was a total loss. The insurance company asked him to prove his inventory loss. For the year, until the date of the fire, Patel's company had sales of $450,000 and purchases of $280,000. Freight-in amounted to $13,700, and beginning inventory was $45,000. Patel always priced his goods to achieve a gross margin of 40 percent. Compute Patel's estimated inventory loss.
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