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	$	29,000		$	7,900		$	3,900
Net purchases through Nov. 17		195,000			45,000			12,900
Net sales through Nov. 17		245,000			64,000			20,900
Historical gross profit ratio		15	%		25	%		30	%

Toppings	Estimated Loss of inventory
Fruit
Marshmallow
Chocolate

Answer 1

1) calculate estimated cost of lost in the fire

	Fruit	Marshmallow	Chocolate
Beginning inventory	29000	7900	3900
Purchase	195000	45000	12900
Cost of goods available for sale	224000	52900	16800
Less: Cost of goods sold	245000*85% = -208250	64000*75% = -48000	20900*70% = -14630
Inventory lost in fire	15750	4900	2170