Gross Profit Method: Estimation of Flood Loss On June 30, 2019, a flashflood damaged the warehouse and factory of Padway Corporation,completely destroying the work-in-process inventory. There was nodamage to either the raw materials or finished goods inventories. Aphysical inventory taken after the flood revealed the flood followin valuations: Raw materialsWork in processFinished goods $ 62,0000119,000 The inventory on January 1, 2019, consisted of the following: Raw materialsWork in processFinished goods $ 30,000100,000140,000$270,000 A review of the books and records disclosed that the gross profit marginhistorically approximated 25% of sales. The sales for the first six monthsof 2019 were $340,000. Raw material purchases were $115,000. Directlabor costs for this period were $80,000, and manufacturing overheadwas historically applied at 50% of direct labor. Required:Compute the value of the work-in-process inventory lost at June 30, 2019.Show supporting computations in good form.
Gross Profit Method: Estimation of Flood Loss On June 30, 2019, a flashflood damaged the warehouse and factory of Padway Corporation,completely destroying the work-in-process inventory. There was nodamage to either the raw materials or finished goods inventories. Aphysical inventory taken after the flood revealed the flood followin valuations: Raw materialsWork in processFinished goods $ 62,0000119,000 The inventory on January 1, 2019, consisted of the following: Raw materialsWork in processFinished goods $ 30,000100,000140,000$270,000 A review of the books and records disclosed that the gross profit marginhistorically approximated 25% of sales. The sales for the first six monthsof 2019 were $340,000. Raw material purchases were $115,000. Directlabor costs for this period were $80,000, and manufacturing overheadwas historically applied at 50% of direct labor. Required:Compute the value of the work-in-process inventory lost at June 30, 2019.Show supporting computations in good form.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Gross Profit Method: Estimation of Flood Loss On June 30, 2019, a flash
flood damaged the warehouse and factory of Padway Corporation,
completely destroying the work-in-process inventory. There was no
damage to either the raw materials or finished goods inventories. A
physical inventory taken after the flood revealed the flood followin valuations:
| Raw materials Work in process Finished goods |
$ 62,000 0 119,000 |
The inventory on January 1, 2019, consisted of the following:
| Raw materials Work in process Finished goods |
$ 30,000 100,000 140,000 $270,000 |
A review of the books and records disclosed that the gross profit margin
historically approximated 25% of sales. The sales for the first six months
of 2019 were $340,000. Raw material purchases were $115,000. Direct
labor costs for this period were $80,000, and manufacturing
was historically applied at 50% of direct labor.
Required:
Compute the value of the work-in-process inventory lost at June 30, 2019.
Show supporting computations in good form.
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