Question

Problem 9-5 Gross profit method [LO9-2] Smith Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2018, 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: Inventory, January 1, 2018 Net purchases through Nov. 17 Net sales through Nov. 17 Historical gross profit ratio Fruit Toppings $ 21,000 155,000 205,000 Marshmallow Toppings $ 7,100 37,000 56,000 Chocolate Toppings $ 3,100 12,100 20,100 35% Required: 1. Calculate the estimated cost of each of the toppings lost in the fire.

Answer 1

Estimated cost of ending inventory

= Cost of Goods available for sale - Cost of Goods Sold

Fruit (21,000+155,000) - (205,000-20%)	12,000
Marshmallow (7,100+37,000) - (56,000-35%)	7,700
Chocolate (3,100+12,100) - (20,100-35%)	2135

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