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Windy City Insurance Ltd. has received a fire-loss claim of 45,000 from Balton Corp, A fire destroyed Balton’s inventory on May 25, 2015. Bolton has average gross profit of 35%. You have obtained the following information:                       Inventory, May 1, 2015                                            $  80,000                         Purchases, May 1- May 25                                   $ 150,000                         Sales, May 1 –May 25                                        $ 300,000 Required: Calculate the estimated amount of inventory lost in the fire. How reasonable is Balton’s claim

Windy City Insurance Ltd. has received a fire-loss claim of 45,000 from Balton Corp, A fire destroyed Balton’s inventory on May 25, 2015. Bolton has average gross profit of 35%. You have obtained the following information:                       Inventory, May 1, 2015                                            $  80,000                         Purchases, May 1- May 25                                   $ 150,000                         Sales, May 1 –May 25                                        $ 300,000 Required: Calculate the estimated amount of inventory lost in the fire. How reasonable is Balton’s claim

FINANCIAL ACCOUNTING
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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Comprehensive problem CP-6-8

Windy City Insurance Ltd. has received a fire-loss claim of 45,000 from Balton Corp, A fire destroyed Balton’s inventory on May 25, 2015. Bolton has average gross profit of 35%. You have obtained the following information:

                      Inventory, May 1, 2015                                            $  80,000

                        Purchases, May 1- May 25                                   $ 150,000

                        Sales, May 1 –May 25                                        $ 300,000

Required:

  1. Calculate the estimated amount of inventory lost in the fire.
  2. How reasonable is Balton’s claim

Answer to question

 

  • The amount of inventory lost in the fire = $35,000
  • How reasonable is Balton's claim?
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