Question

Whispering Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. Corporate records disclose the following. Inventory (beginning) $ 79,100 Sales revenue $422,000 Purchases 288,300 Sales returns 21,400 Purchase returns 27,900 Gross profit % based on net selling price 33 % Merchandise with a selling price of $29,400 remained undamaged after the fire, and damaged merchandise has a net realizable value of $8,700. The company does not carry fire insurance on its inventory. Compute the amount of inventory fire loss. (Do not use the retail inventory method.) Inventory fire loss $

Answer 1

$42,700

Step-by-step explanation:

The calculation of the amount of inventory fire loss is shown below:-

Particulars Amount

Opening inventory $79,100

Purchases $288,300

Less:- Purchase returns $27,900 $260,400

Goods available $339,500

Sales revenue $422,000

Less- Sales returns $21,400

Net Sales $400,600

Less:- Gross profit $132,198 $268,402

($400,600 × 33%)

Estimated ending inventory $71,098

Less:- Goods on hand-undamaged $19,698

$29400 × (1 - 0.33)

Less:- Goods on hand-damaged $8,700

Fire loss on inventory $42,700