California Inc., through no fault of its own, lost an entire plant due to anearthquake on May 1, 2016. In preparing its insurance claim on theinventory loss, the company developed the following data: Inventory onJanuary 1, 2016, $300,000; sales and purchases from January 1, 2016, toMay 1, 2016, $1,300,000 and $875,000, respectively. Californiaconsistently reports a 40% gross profit. The estimated inventory on May 1,2016, is:a. $302,500.b. $360,000.c. $395,000.d. $455,000.

To estimate the inventory lost in the earthquake on May 1, 2016, we use the gross profit method.…

Answered: California Inc., through no fault of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

California Inc., through no fault of its own, lost an entire plant due to an earthquake on May 1, 2018. In preparing its insurance claim on the inventory loss, the company developed the following data: Inventory January 1, 2018, $300,000; sales and purchases from January 1, 2018, to May 1, 2018, $1,300,000 and $875,000, respectively, California consistently reports a 40% gross profit. The estimated inventory on May 1, 2018, is: $395,000. $455,000. $302,500. C$360,000.
A company through no fault of its own, lost an entire building due to an earthquake on May 1, 2024. In preparing its insurance claim on the inventory loss, the company developed the following data: Inventory January 1, 2024, $350,000; sales and purchases from January 1, 2024, to May 1, 2024, $1,110,000 and $945,000, respectively. The company consistently reports a 40% gross profit. The estimated inventory on May 1, 2024, is:
In 2022, Sargent Company experienced a major casualty loss. The roof of its warehouse collapsed in an ice storm and destroyed its entire inventory. The company began the year with inventory of $300. It made purchases of $5,640 but returned $80 worth of merchandise. Sales prior to the ice storm were $9,400. Sargent must use the gross profit method to determine inventory on hand on the date of the casualty. The following is an excerpt of its income statement for the last three years. 2019 2020 2021 Net Sales $5,000 $6,000 $9,000 Cost of Goods Sold 2,150 2,340 3,312 General and Administrative Expense 500 600 900 Depreciation Expense 125 200 325 Operating Income $2,225 $2,860 $4,463 Requirement. Assume that Sargent uses the most recent three years of net sales and cost of goods sold to determine its historical gross profit. What are estimated cost of goods sold, estimated gross profit, and estimated ending…
During 2016, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts: 2014 understated by $120,000 2015 overstated by 150,000 WMC uses the periodic inventory system and the FIFO cost method. Required: 1. Determine the effect of these errors on retained earnings at January 1, 2016, before any adjustments. Explain your answer. (Ignore income taxes.) 2. Prepare a journal entry to correct the error. 3. What other step(s) would be taken in connection with the error?
Franklin Co. has experienced gross profit ratios for 2019, 2018, and 2017 of 33%, 30%, and 31%, respectively. On April 3, 2020, the firm's plant and all its inventory were destroyed by a tornado. Accounting records for 2020, which were available because they were stored in a protected vault, showed the following: Sales from January 1 through April 2 January 1 inventory amount Purchases of inventory from January 1 through April 2 $71,340 31,795 59,326 Required: Calculate the amount of the insurance claim to be filed for the inventory destroyed in the tornado. (Hint: Use the cost of goods sold model and a gross profit ratio that will result in the largest claim.) (Do not round intermediate calculations.) Insurance claim
In 2016, J J Dishes changed its method of valuing inventory from the FIFO method to the LIFO method. At December 31, 2015, J J’s inventories were $96 million (FIFO). J J’s records were insufficient to determine what inventories would have totaled if determined on a LIFO cost basis. Briefly describe the steps J J should take to report the change.
Mikrokosmos Co. prepared its annual financial statements on a calendar-year basis. In 2020, Mikrokosmos Co. experience an impairment in its inventory. Their inventories (which cost P1,320,000) only have a net realizable value of P1,100,000. As a matter of policy, they record any write-downs in inventory as part of “Loss on Inventory Writedown” (LIW) and uses an allowance account as a valuation account for inventory. During 2021, the same cost of inventories further went down to only 1,050,000 net realizable value. Which among the following best describes the journal entry for the impairment at year 2021? A. A debit to LIW and credit to Allowance for Inventory Writedown, P170,000 B. A debit to Allowance for Inventory Writedown and credit to LIW, P50,000 C. A debit to Allowance for Inventory Writedown and credit to LIW, P170,000 D. A debit to LIW and credit to Allowance for Inventory Writedown, P50,000
BBM Company lost most of its inventory in a fire in December, 2021, just before the year-end physical inventory was taken. The company’s books disclosed the following:Invy, 1/1/21 - 1,700,000Purchases - 3,900,000 Purchase return - 300,000Sales - 6,500,000 Sales returns - 240,000Merchandise costing P126,000 remain undamaged after the fire. Damaged merchandise with an original selling price of P150,000 had a net realizable value of P53,000. A partial comparative profit and loss for 2020 and 2019 also disclosed the following:2020: Sales - 5,000,000; CGS - 3,025,0002019: Sales - 5,600,000; CGS - 3,332,000Assuming that BBM Company had no insurance coverage, what is the amount of loss as a result of the fire?
In 2016, CPS Company changed its method of valuing inventory from the FIFO method to the average cost method. At December 31, 2015, CPS’s inventories were $32 million (FIFO). CPS’s records indicated that the inventories would have totaled $23.8 million at December 31, 2015, if determined on an average cost basis. Required: 1. Prepare the journal entry to record the adjustment. (Ignore income taxes.) 2. Briefly describe other steps CPS should take to report the change.
Coastal Shores Inc. (CSI) was completely destroyed by Hurricane Fred on August 5, 2013. At January 1, CSI reported an inventory of $170,000. Sales from January 1, 2013, to August 5, 2013, totaled $480,000 and purchases totaled $195,000 during that time. CSI normally shows a gross profit percentage of 40%. The estimated inventory loss due to Hurricane Fred would be:
In 2018, the Barton and Barton Company changed its method of valuing inventory from the FIFO method to theaverage cost method. At December 31, 2017, B & B’s inventories were $32 million (FIFO). B & B’s recordsindicated that the inventories would have totaled $23.8 million at December 31, 2017, if determined on anaverage cost basis. Ignoring income taxes, what journal entry will B & B use to record the adjustment in 2018?Briefly describe other steps B & B should take to report the change.
During the taking of its physical inventory on December 31, 2014, Kate's Interiors Company incorrectly counted its inventory as $446,935 instead of the correct amount of $500,565. Indicate the effect of the misstatement on Kate's Interiors's December 31, 2014, balance sheet and income statement for the year ended December 31, 2014. Also record the amount of each overstatement or understatement. Enter all amounts as positive numbers. Cost of merchandise sold Current assets Gross profit Merchandise inventory Net income Owner's equity Total assets $ $ $ $ $ S S

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS