On April 15, 2021, fire damaged the office and warehouse of Stanislaw Corporation. The only accounting record saved was the general ledger, from which the balance sheet data below was prepared. Stanislaw CorporationMarch 31, 2021      Dr.    Cr. Cash $ 20,000   Accounts receivable 40,000   Inventory, December 31, 2020 75,000   Land 35,000   Buildings 110,000   Accumulated depreciation   $ 41,300 Equipment 3,600   Accounts payable   23,700 Other accrued expenses   10,200 Common stock   100,000 Retained earnings   52,000 Sales revenue   135,000 Purchases 52,000   Miscellaneous expense 26,600                     $362,200 $362,200 The following data and information have been gathered. 1.    The fiscal year of the corporation ends on December 31. 2.    An examination of the April bank statement and canceled checks revealed that checks written during the period April 1–15 totaled $13,000: $5,700 paid to accounts payable as of March 31, $3,400 for April merchandise shipments, and $3,900 paid for other expenses. Deposits during the same period amounted to $12,950, which consisted of receipts on account from customers with the exception of a $950 refund from a vendor for merchandise returned in April. 3.    Correspondence with suppliers revealed unrecorded obligations at April 15 of $15,600 for April merchandise shipments, including $2,300 for shipments in transit (f.o.b. shipping point) on that date. 4.    Customers acknowledged indebtedness of $46,000 at April 15, 2021. It was also estimated that customers owed another $8,000 that will never be acknowledged or recovered. Of the acknowledged indebtedness, $600 will probably be uncollectible. 5.    The companies insuring the inventory agreed that the corporation’s fire-loss claim should be based on the assumption that the overall gross profit rate for the past 2 years was in effect during the current year. The corporation’s audited financial statements disclosed this information:      Year EndedDecember 31   2020    2019 Net sales $530,000 $390,000 Net purchases 280,000 235,000 Beginning inventory 50,000 66,000 Ending inventory 75,000 50,000 6.    Inventory with a cost of $7,000 was salvaged and sold for $3,500. The balance of the inventory was a total loss. Instructions Prepare a schedule computing the amount of inventory fire loss. The supporting schedule of the computation of the gross profit should be in good form.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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On April 15, 2021, fire damaged the office and warehouse of Stanislaw Corporation. The only accounting record saved was the general ledger, from which the balance sheet data below was prepared.

Stanislaw Corporation
March 31, 2021
     Dr.    Cr.
Cash $ 20,000  
Accounts receivable 40,000  
Inventory, December 31, 2020 75,000  
Land 35,000  
Buildings 110,000  
Accumulated depreciation   $ 41,300
Equipment 3,600  
Accounts payable   23,700
Other accrued expenses   10,200
Common stock   100,000
Retained earnings   52,000
Sales revenue   135,000
Purchases 52,000  
Miscellaneous expense 26,600                  
  $362,200 $362,200

The following data and information have been gathered.

1.    The fiscal year of the corporation ends on December 31.

2.    An examination of the April bank statement and canceled checks revealed that checks written during the period April 1–15 totaled $13,000: $5,700 paid to accounts payable as of March 31, $3,400 for April merchandise shipments, and $3,900 paid for other expenses. Deposits during the same period amounted to $12,950, which consisted of receipts on account from customers with the exception of a $950 refund from a vendor for merchandise returned in April.

3.    Correspondence with suppliers revealed unrecorded obligations at April 15 of $15,600 for April merchandise shipments, including $2,300 for shipments in transit (f.o.b. shipping point) on that date.

4.    Customers acknowledged indebtedness of $46,000 at April 15, 2021. It was also estimated that customers owed another $8,000 that will never be acknowledged or recovered. Of the acknowledged indebtedness, $600 will probably be uncollectible.

5.    The companies insuring the inventory agreed that the corporation’s fire-loss claim should be based on the assumption that the overall gross profit rate for the past 2 years was in effect during the current year. The corporation’s audited financial statements disclosed this information:

     Year Ended
December 31
  2020    2019
Net sales $530,000 $390,000
Net purchases 280,000 235,000
Beginning inventory 50,000 66,000
Ending inventory 75,000 50,000

6.    Inventory with a cost of $7,000 was salvaged and sold for $3,500. The balance of the inventory was a total loss.

Instructions

Prepare a schedule computing the amount of inventory fire loss. The supporting schedule of the computation of the gross profit should be in good form.

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