ProblemsProblem 1Gross Margin Method: Inventory Burned, Indemnity. Word WholesaleCompany'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 forthe past three years were:Cost of Goods SoldP500,000460,000500,000Gross MarginP125,000120,000120,000Year20X220X320X4Required:1. Estimate the cost of the inventory destroyed in the fire.2. Under what conditions would your response to (1) above bequestionable?3. The insurance company pays indemnity on market value at the dateof the fire. What amount would you recommend that Word submitas an insurance claim? Explain.

Gross Margin Method The calculation of gross margin method to taken up the gross margin as…

Answered: Required: 1. Estimate the cost of the…

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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When it is probable that total contract costs will exceed total contract revenue, how shall it be accounted for? Group of answer choices The expected loss shall be recognized as an expense immediately only when the outcome of a construction contract cannot be estimated reliably. The expected loss shall be recognized as an expense immediately regardless of the certainty or uncertainty of the outcome of a construction contract. The expected loss shall be accounted for based on company’s policy. The expected loss shall be recognized as an expense by reference to the state of completion of the contract activity at the end of the reporting period when the outcome of a construction contract cannot be estimated reliably. PreviousNext
Suppose Mylan could write an insurance contract whereby it is insured against all penalties resulting from misclassification. Would this affect their need to disclose? Group of answer choices No, because if they are fully covered, investors would find the loss contingency misleading since there is no receivable for the insurance Yes, because they would offset the loss contingency with a receivable which would net to zero No, because purchasing insurance does not relieve the purchaser of its obligation to make payments related to losses that result from risk. Yes, because it is impossible to insure loss contingencies
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The _______________ problem is when customers who are most likely to have a claim against an insurance company are those quickest to apply for an insurance contract. Group of answer choices a. Capital adequacy b. Default risk c. Adverse selection d. Mismatched maturity
Q#3: How is accidental loss of goods treated in final account in case: • Goods had not been insured or Goods have been insured and the insurance company has claims associated with it.
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If a prospect does NOT submit the initial premium with an application, the producer should A.refuse tratinghe application B.submit the application to the insurance company and advance the premium for he prospect from the agency account C.submit the applicalion to the insurance company without the premium D.give lhe applicant a conditional receipt and send the application to the insurance company wilhout the premium
Which of the following is correct about the effect of a deductible with respect to the price of an insurance policy? O A policy with a deductible will raise the premium. This will make the overall cost of insurance higher for policyholders who do not have a claim, but lower for those with high claims O A policy with a deductible will lower the premium. This will make the overall cost of insurance higher for policyholders who do not have a claim, but lower for those with high claims O A policy with a deductible will raise the premium. This will make the overall cost of insurance lower for policyholders who do not have a claim, but higher for those with high claims O A policy with a deductible will lower the premium. This will make the overal cost of insurance lower for policyholders who do not have a claim, but higher for those with high claims
When a contingent liability exists, the likelihood for loss can be evaluated as probable, reasonably possible, or remote. A remote loss is a loss where the chance of occurrence is slight a loss that is likely to occur a loss where the chance of occurrence is moderate falls between the chance of occurrence is slight and a loss is likely to occur
STATE: Which of the following statements regarding homeowner's insurance is true? A. The listing agent should advise the seller to cancel homeowner's insurance immediately after by the seller's standard homeowner's going under contract B. Vacant properties are always covered insurance police C. A seller that retains possession after closing may not be covered under their homeowner's insurance policy D. Homeowner's insurance policy premiums are not affected by previous claims
. In determining the amount of a provision, a company using IFRS should generally measure: a. using the midpoint of the range between the lowest possible loss and the highest possible loss. b. using the minimum amount of the loss in the range. c. using the best estimate of the amount of the loss expected to occur. d. using the maximum amount of the loss in the range.

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