Exercise 9-18 Monty Lumber Company handles three principal lines of merchandise

Question

Exercise 9-18

Monty Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost.

Lumber

25%

Millwork

30%

Hardware and fittings

40%

On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were maintained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction.

Lumber

Millwork

Hardware

Inventory, Jan. 1, 2017

$246,600

$91,300

$44,100

Purchases to Aug. 18, 2017

1,479,900

378,000

162,800

Sales to Aug. 18, 2017

2,059,300

536,900

218,400

Submit your estimate of the inventory amounts immediately preceding the fire. (Round ratios for computational purposes to 5 decimal places, e.g. 78.74265% and final answers to 0 decimal places, e.g. 28,987.)

Lumber

Millwork

Hardware

Inventory

$

$

$

Lumber

25%

Millwork

30%

Hardware and fittings

40%

Explanation / Answer

Cost of goods sold=

Lumber=$20,59,300/1.25=$16,47,440

Millwork=$5,36,900/1.30=$4,13,000

Hardware=$2,18,000/1.4=$1,55,714

Lumber Millwork Hardware Inventory 1/1/17 2,46,600 91,300 44,100 (+)Purchase 18/8/17 14,79,900 3,78,000 1,62,800 Cost of goods available 17,25,500 4,69,300 2,06,900 (-)cost of goods sold(note) (16,47,440) (4,13,000) (1,55,714) Inventory 18/8/17 79,060 56,300 51,186

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