Question

Smith Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2021, a fire resulted in the loss of all of the toppings stored in one section of the warehouse. The company must provide its insurance company with an estimate of the amount of inventory lost. The following information is available from the company's accounting records:

	Fruit Toppings			Marshmallow Toppings			Chocolate Toppings
Inventory, January 1, 2021	$	17,000		$	6,700		$	2,700
Net purchases through Nov. 17		135,000			33,000			11,700
Net sales through Nov. 17		185,000			52,000			19,700
Historical gross profit ratio		25	%		35	%		35	%

Required:
1. Calculate the estimated cost of each of the toppings lost in the fire.

	Estimate Cost of
Toppings	lost inventory
Fruit
Marshmallow
Chocolate

Answer 1

Toppings fruit Estimated cost of Lost inventory $ 13,250 $ 5,900 $ 1,595 Marshmallow Chocolate Calculation: fruit Marshmallow Chocolate Toppings Toppings Toppings. Estimate of cost of goods sold: Cost percentage 75% 65% 65% x Net Sales $185,000 $ 52,000 $19,700 Estimate of cost of goods sold $130, 750 $33,800 & 128 Beginning inventory $17,000 $ 6,700 $2,700 Pluss Net Purchases $135,000 $33,000 $11700 a arods available for sale $152,000 $39,700 $14400 Tey. Estimate of cost of goods Bold $138,750 $ 33,000 $12,005 hate of cost of inventory lost Estimat 4 13,250 & 5,900 & 1595 CO

Cost Percentage - 100% - Historical Gross Profit Ratie. fruit Toppings: Cost Percentage - 100% - 25% 75% Marshmallow Toppings. Cost Percentage = 100% - 35% & 6.5% Chocolate Toppings? Cost Percentage = 100% -35% & 65% Estimate of cost of goods sold = (cost percentage & Net Sales)