Cardi, Inc. Company lost most of its inventory in a fire in
November just before the year-end physical inventory was taken.
Corporate records disclose the following.
Inventory (beginning) $186,000
Sales $863,000
Purchases 667,000
Sales returns 64,000
Purchase returns 46,000
Gross profit percentage based on net selling price 25%
Merchandise with a selling price of $65,000 remained undamaged
after the fire, and damaged merchandise has a salvage value of
$26,400. The company does not carry fire insurance on its
inventory.
a) Prepare a formal labeled schedule computing the fire
loss incurred.
Solution a:
Computation of fire loss | |
Particulars | Amount |
Beginning inventory | $186,000.00 |
Add: Net purchases | $621,000.00 |
Cost of goods available for sale | $807,000.00 |
Less: cost of goods sold ($799,000*75%) | $599,250.00 |
Required ending inventory | $207,750.00 |
Less: Cost of undamaged inventory ($65,000*75%) | $48,750.00 |
Less: Salvage value of damaged merchandise | $26,400.00 |
Fire loss | $132,600.00 |
Cardi, Inc. Company lost most of its inventory in a fire in November just before the...
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