Using the Retail Inventory method, determine the amount of World Gamers Ltd claim for the inventory loss by calculating: (a) the cost of goods available for sale (b) the estimated cost of sales (c) the estimated inventory lost by fire

Using the Retail Inventory method, determine the amount of World Gamers Ltd claim for the inventory loss by calculating: (a) the cost of goods available for sale (b) the estimated cost of sales (c) the estimated inventory lost by fire

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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Question

Part 1
On 12 February, the business premises of World Gamers Ltd was destroyed by flood waters.
The insurance company asked the Owner to prove the inventory loss experienced by the
flood. Records salvaged by the system identified beginning inventory was $128,000, net
sales up to 12 February totalled $430,300. The owner ensured that inventory was marked up
to allow a gross profit of 45%. Net purchases totalled $364,600 and freight inwards
amounted to $5,900.
Required:
Using the Retail Inventory method, determine the amount of World Gamers Ltd claim for the
inventory loss by calculating:
(a) the cost of goods available for sale
(b) the estimated cost of sales
(c) the estimated inventory lost by fire.

Part 2
Steele Security Systems Ltd sells home security and surveillance systems. The table below
summarises the inventory movements for the most popular model of camera used in their
home security systems.
July 1
Aug. 15
Sept. 2
Nov. 10
Dec. 19
Feb. 21
Mar. 28
May 31
Beginning Inventory
Sales
Purchases
Sales
Sales
Purchases
Sales
Sales
55 @ $250 =
40
90 @ $255 =
35
25
85 @ $257 =
42
55
$ 13 750
22 950
21 845
Required:
Using the moving average method costing inventory under perpetual inventory, calculate:
(a) the cost of sales and
(b) closing value of inventory to be shown in the financial reports for the year ended 30 June
2023.

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