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	$	15,000		$	6,500		$	2,500
Net purchases through Nov. 17		125,000			31,000			11,500
Net sales through Nov. 17		175,000			50,000			19,500
Historical gross profit ratio		30	%		35	%		35	%

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

	Estimated cost of Toppings lost inventory Fruit Marshmallow Chocolate

Answer 1

1) calculate estimated cost of lost in the fire

	Fruit	Marshmallow	Chocolate
Beginning inventory	15000	6500	2500
Purchase	125000	31000	11500
Cost of goods available for sale	140000	37500	14000
Less: Cost of goods sold	175000*70% = -122500	50000*65% = -32500	19500*65% = -12675
Inventory lost in fire	17500	5000	1325