On April 15, 2015, fire damaged the office and warehouse of Stanislaw Corporatio
ID: 2417096 • Letter: O
Question
On April 15, 2015, fire damaged the office and warehouse of Stanislaw Corporation. The only accounting record saved was the general ledger, from which the trial balance below was prepared.
STANISLAW CORPORATION
TRIAL BALANCE
MARCH 31, 2015
Cash
$24,900
Accounts receivable
42,800
Inventory, December 31, 2014
83,000
Land
38,700
Buildings
115,000
Accumulated depreciation
$44,100
Equipment
3,800
Accounts payable
27,000
Other accrued expenses
23,870
Common stock
103,030
Retained earnings
59,100
Sales revenue
139,900
Purchases
59,100
Miscellaneous expense
29,700
$397,000
$397,000
The following data and information have been gathered.
Year Ended
December 31
2014
2013
Compute the amount of inventory fire loss
STANISLAW CORPORATION
TRIAL BALANCE
MARCH 31, 2015
Cash
$24,900
Accounts receivable
42,800
Inventory, December 31, 2014
83,000
Land
38,700
Buildings
115,000
Accumulated depreciation
$44,100
Equipment
3,800
Accounts payable
27,000
Other accrued expenses
23,870
Common stock
103,030
Retained earnings
59,100
Sales revenue
139,900
Purchases
59,100
Miscellaneous expense
29,700
$397,000
$397,000
Explanation / Answer
On April 15, 2015, fire damaged the office and warehouse of Stanislaw Corporation. The only accounting record saved was the general ledger, from which the trial balance below was prepared.
STANISLAW CORPORATION
TRIAL BALANCE
MARCH 31, 2015
Cash
$29,000
Accounts receivable
44,500
Inventory, December 31, 2014
77,500
Land
39,800
Buildings
111,100
Accumulated depreciation
$43,500
Equipment
3,770
Accounts payable
32,900
Other accrued expenses
15,360
Common stock
101,710
Retained earnings
61,200
Sales revenue
139,300
Purchases
61,200
Miscellaneous expense
27,100
$393,970
$393,970
The following data and information have been gathered.
1. The fiscal year of the corporation ends on December 31.
2. An examination of the April bank statement and canceled checks revealed that checks written during the period April 1–15 totaled $18,400: $6,410 paid to accounts payable as of March 31, $3,560 for April merchandise shipments, and $4,750 paid for other expenses. Deposits during the same period amounted to $13,600, which consisted of receipts on account from customers with the exception of a $880 refund from a vendor for merchandise returned in April.
3. Correspondence with suppliers revealed unrecorded obligations at April 15 of $23,100 for April merchandise shipments, including $2,980 for shipments in transit (f.o.b. shipping point) on that date.
4. Customers acknowledged indebtedness of $55,600 at April 15, 2015. It was also estimated that customers owed another $8,490 that will never be acknowledged or recovered. Of the acknowledged indebtedness, $730 will probably be uncollectible.
5. The companies insuring the inventory agreed that the corporation’s fire-loss claim should be based on the assumption that the overall gross profit rate for the past 2 years was in effect during the current year. The corporation’s audited financial statements disclosed this information:
Year Ended
December 31
2014
2013
Net sales $533,100 $384,800
Net purchases 283,000 242,300
Beginning inventory 59,400 69,300
Ending inventory 77,500 59,400
6. Inventory with a cost of $7,560 was salvaged and sold for $3,850. The balance of the inventory was a total loss.
Compute the amount of inventory fire loss. (Round ratios for computational purposes to 1 decimal places, e.g 78.5% and final answer to 0 decimal places, e.g. 28,987.)
Inventory fire loss
$
On April 15, 2015, fire damaged the office and warehouse of Stanislaw Corporation. The only accounting record saved was the general ledger, from which the trial balance below was prepared.
STANISLAW CORPORATION
TRIAL BALANCE
MARCH 31, 2015
Cash
$29,000
Accounts receivable
44,500
Inventory, December 31, 2014
77,500
Land
39,800
Buildings
111,100
Accumulated depreciation
$43,500
Equipment
3,770
Accounts payable
32,900
Other accrued expenses
15,360
Common stock
101,710
Retained earnings
61,200
Sales revenue
139,300
Purchases
61,200
Miscellaneous expense
27,100
$393,970
$393,970
The following data and information have been gathered.
1. The fiscal year of the corporation ends on December 31.
2. An examination of the April bank statement and canceled checks revealed that checks written during the period April 1–15 totaled $18,400: $6,410 paid to accounts payable as of March 31, $3,560 for April merchandise shipments, and $4,750 paid for other expenses. Deposits during the same period amounted to $13,600, which consisted of receipts on account from customers with the exception of a $880 refund from a vendor for merchandise returned in April.
3. Correspondence with suppliers revealed unrecorded obligations at April 15 of $23,100 for April merchandise shipments, including $2,980 for shipments in transit (f.o.b. shipping point) on that date.
4. Customers acknowledged indebtedness of $55,600 at April 15, 2015. It was also estimated that customers owed another $8,490 that will never be acknowledged or recovered. Of the acknowledged indebtedness, $730 will probably be uncollectible.
5. The companies insuring the inventory agreed that the corporation’s fire-loss claim should be based on the assumption that the overall gross profit rate for the past 2 years was in effect during the current year. The corporation’s audited financial statements disclosed this information:
Year Ended
December 31
2014
2013
Net sales $533,100 $384,800
Net purchases 283,000 242,300
Beginning inventory 59,400 69,300
Ending inventory 77,500 59,400
6. Inventory with a cost of $7,560 was salvaged and sold for $3,850. The balance of the inventory was a total loss.
Compute the amount of inventory fire loss. (Round ratios for computational purposes to 1 decimal places, e.g 78.5% and final answer to 0 decimal places, e.g. 28,987.)
Inventory fire loss
$
COMPUTATION OF INVENTORY FIRE LOSS Inventory $59,400 Purchases $61,200 April merchandise shipments $14,500 3920 Unrecorded purchases on account ($32900 -18400) $16,840 12720 Total $135,100 5680 Less: Shipments in transit ($2,980) 16840 Less: Merchandise returned ($880) ($3,860) Merchandise available for sale $131,240 Less estimated cost of sales Sales, 1/1/ – 3/31/2015 $139,300 Sales, 4/1/ – 4/15/2015 Receivables acknowledged 4/15/2015 $55,600 Estimated receivables not acknowledged $8,490 Total $64,090 Add collections, 4/1/ – 4/15/15($13,600 – $880 $12,720 Total $76,810 Less receivables, 3/31/15 ($44,500) $32,310 Total sales 1/1/ – 4/15/15 $171,610 Less Gross Profit (44.74% x $171,610) ($76,778) ($94,832) Estimated merchandise inventory $36,408 Less: Sale of salvaged inventory ($3,850) Inventory fire loss $32,558 Computation of Gross Profit Ratio Net sales 2013 $533,100 Net sales 2014 $384,800 Total sales $917,900 Beginning Inventory $59,400 Purchases 2013 $283,000 Purchases 2014 $242,300 Less: ending Inventory -$77,500 -$507,200 Gross Profit $410,700 Gross Profit ratio = $410,700/$917,900 44.74%
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