On April 10, 2023, a fire damaged the office and warehouse of Sill Company. Most of the accounting records were destroyed, but the following account balances were determined as of March 31, 2023: Sales Revenue (January 1-March 31, 2023), $180,000; Purchases (January 1- March 31, 2023), $94,000. The company's fiscal year ends on December 31. It uses a periodic inventory system. From an analysis of the April bank statement, you discover cancelled checks of $4,200 for cash purchases during the period April 1-10. Deposits during the same period totaled $18,500. Of that amount, 60% were collections on accounts receivable related to sales made in prior periods, and the balance was cash sales. Correspondence with the company's principal suppliers revealed $12,400 of purchases on account from April 1 to April 10. Of that amount, $1,600 was for merchandise in transit on April 10 that was shipped FOB destination. Correspondence with the company's principal customers produced acknowledgments of credit sales totaling $37,000 from April 1 to April 10. It was estimated that $5,600 of credit sales will never be acknowledged or recovered from customers. Sill Company reached an agreement with the insurance company that its fire-loss claim should be based on the average of the gross profit rates for the preceding 2 years. The financial statements for 2021 and 2022 showed the following data. 2022 2021 Net Sales $600,000 $450,000 Beginning Inventory ? 40,000 Purchases 419,000 339,000 Purchases Returns and Allowances 14,900 13.300 Purchase Discounts 9,500 8,500 Freight-in Ending Inventory 9,400 8,800 80,000 60,000 Inventory with a cost of $17,000 was salvaged from the fire. Instructions (a) Determine the balances in (1) Sales Revenue and (2) Purchases at April 10, 2023. (b) Determine the average gross profit rate for the years 2021 and 2022. (c) Determine the inventory loss as a result of the fire, using the gross profit method.
On April 10, 2023, a fire damaged the office and warehouse of Sill Company. Most of the accounting records were destroyed, but the following account balances were determined as of March 31, 2023: Sales Revenue (January 1-March 31, 2023), $180,000; Purchases (January 1- March 31, 2023), $94,000. The company's fiscal year ends on December 31. It uses a periodic inventory system. From an analysis of the April bank statement, you discover cancelled checks of $4,200 for cash purchases during the period April 1-10. Deposits during the same period totaled $18,500. Of that amount, 60% were collections on accounts receivable related to sales made in prior periods, and the balance was cash sales. Correspondence with the company's principal suppliers revealed $12,400 of purchases on account from April 1 to April 10. Of that amount, $1,600 was for merchandise in transit on April 10 that was shipped FOB destination. Correspondence with the company's principal customers produced acknowledgments of credit sales totaling $37,000 from April 1 to April 10. It was estimated that $5,600 of credit sales will never be acknowledged or recovered from customers. Sill Company reached an agreement with the insurance company that its fire-loss claim should be based on the average of the gross profit rates for the preceding 2 years. The financial statements for 2021 and 2022 showed the following data. 2022 2021 Net Sales $600,000 $450,000 Beginning Inventory ? 40,000 Purchases 419,000 339,000 Purchases Returns and Allowances 14,900 13.300 Purchase Discounts 9,500 8,500 Freight-in Ending Inventory 9,400 8,800 80,000 60,000 Inventory with a cost of $17,000 was salvaged from the fire. Instructions (a) Determine the balances in (1) Sales Revenue and (2) Purchases at April 10, 2023. (b) Determine the average gross profit rate for the years 2021 and 2022. (c) Determine the inventory loss as a result of the fire, using the gross profit method.
Century 21 Accounting Multicolumn Journal
11th Edition
ISBN:9781337679503
Author:Gilbertson
Publisher:Gilbertson
Chapter20: Accounting For Inventory
Section: Chapter Questions
Problem 1CP
Related questions
Question
Transcribed Image Text:On April 10, 2023, a fire damaged the office and warehouse of Sill Company. Most of the
accounting records were destroyed, but the following account balances were determined as of
March 31, 2023: Sales Revenue (January 1-March 31, 2023), $180,000; Purchases (January 1-
March 31, 2023), $94,000.
The company's fiscal year ends on December 31. It uses a periodic inventory system.
From an analysis of the April bank statement, you discover cancelled checks of $4,200 for cash
purchases during the period April 1-10. Deposits during the same period totaled $18,500. Of that
amount, 60% were collections on accounts receivable related to sales made in prior periods, and
the balance was cash sales.
Correspondence with the company's principal suppliers revealed $12,400 of purchases on
account from April 1 to April 10. Of that amount, $1,600 was for merchandise in transit on April
10 that was shipped FOB destination.
Correspondence with the company's principal customers produced acknowledgments of credit
sales totaling $37,000 from April 1 to April 10. It was estimated that $5,600 of credit sales will
never be acknowledged or recovered from customers.
Sill Company reached an agreement with the insurance company that its fire-loss claim should
be based on the average of the gross profit rates for the preceding 2 years. The financial
statements for 2021 and 2022 showed the following data.
2022
2021
Net Sales
$600,000 $450,000
Beginning Inventory
?
40,000
Purchases
419,000
339,000
Purchases Returns and Allowances
14,900
13.300
Purchase Discounts
9,500
8,500
Freight-in
Ending Inventory
9,400
8,800
80,000
60,000
Inventory with a cost of $17,000 was salvaged from the fire.
Instructions
(a) Determine the balances in (1) Sales Revenue and (2) Purchases at April 10, 2023.
(b) Determine the average gross profit rate for the years 2021 and 2022.
(c) Determine the inventory loss as a result of the fire, using the gross profit method.
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