Question

Exercise 9-17 You are called by Tim Duncan of Sheffield Co. on July 16 and asked to prepare a claim for insurance as a result of a theft that took pace the ni ht before You suggest that дп mento y e aken immediately. The following data are available. Inventory, July 1 Purchases-goods placed in stock July 1-15 Sales revenue-goods delivered to customers (gross) Sales returns-goods returned to stock 36,600 87,400 123,700 4,400 Your client reports that the goods on hand on July 16 cost $30,900, but you determine that this figure includes goods of $6,500 received on a consignment basis. Your past records show that sales are made at approximately 40% over cost. Duncan's insurance covers only goods owned Compute the claim against the insurance company. (Round ratios for com'putational purposes to 2 decimal places, e.g. 78.73% and final answer to 0 decim'al places, e.g. 28,987 Claim against the insurance company

Answer 1

Claim against the insurance company= $ 14,386(Refer note below)

Note:

Sales includes those goods that are delivered to the customers

Net sales= Sales-Sales return=$123700 -$ 4400=$ 119300

Since goods are sold at a profit of 40% above the cost

Therefore cost of Goods Sold= $ 119300*100/$140=$ 85214.29

Net purchases= $ 87400

Closing Stock= Opening stock+Purchases- Cost of Goods Sold

=$ 36,600+$ 87400-$ 85214.29=$38,785.71 i.e $ 38786

Therefore closing stock=$38786

Given that goods worth $ 6500 were received on consignment basis. So these goods do not belong to the company . So therefore goods in hand for the company on july 16= $30900-$6500

Therefore goods in hand for the company on july 16=$ 24,400

Loss due to theft=$38786-$ 24,400=$ 14,386

Therefore the Claim against the insurance company= $ 14,386