On April 15, 2015, fire damaged the office and warehouse of Stanislaw Corporatio
ID: 2449446 • 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.
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
$29,300
Accounts receivable
50,300
Inventory, December 31, 2014
77,800
Land
45,000
Buildings
114,100
Accumulated depreciation
$50,800
Equipment
3,660
Accounts payable
28,700
Other accrued expenses
25,790
Common stock
103,570
Retained earnings
56,300
Sales revenue
140,400
Purchases
56,300
Miscellaneous expense
29,100
$405,560
$405,560
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 $20,300: $6,390 paid to accounts payable as of March 31, $3,320 for April merchandise shipments, and $4,210 paid for other expenses. Deposits during the same period amounted to $15,500, 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 $25,000 for April merchandise shipments, including $2,450 for shipments in transit (f.o.b. shipping point) on that date.
4.
Customers acknowledged indebtedness of $48,500 at April 15, 2015. It was also estimated that customers owed another $8,340 that will never be acknowledged or recovered. Of the acknowledged indebtedness, $650 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
$534,000
$380,300
Net purchases
280,500
244,900
Beginning inventory
51,100
76,000
Ending inventory
77,800
51,100
6.
Inventory with a cost of $7,340 was salvaged and sold for $4,130. 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 is ??
STANISLAW CORPORATION
TRIAL BALANCE
MARCH 31, 2015
Cash
$29,300
Accounts receivable
50,300
Inventory, December 31, 2014
77,800
Land
45,000
Buildings
114,100
Accumulated depreciation
$50,800
Equipment
3,660
Accounts payable
28,700
Other accrued expenses
25,790
Common stock
103,570
Retained earnings
56,300
Sales revenue
140,400
Purchases
56,300
Miscellaneous expense
29,100
$405,560
$405,560
Explanation / Answer
Sale for 2 year = 534000 + 380300
Sale for 2 year = $ 914300
Gross Profit for 2 year =Sale - (Beginning inventory of 2013 + Purchase of 2 year - Ending inventory 2014)
Gross Profit for 2 year = 914300 - (76000 + (280500+244900) - 77800)
Gross Profit for 2 year = $ 390700
Gross Profit % = Gross Profit for 2 year /Sale for 2 year
Gross Profit % = 390700/914300
Gross Profit % = 42.7%
Amount of inventory fire loss = (Inventory, December 31, 2014 + Purchases till MARCH 31, 2015 - Cost of Good Sold till March 31 + April merchandise shipments paid + merchandise returned + unrecorded obligations for April merchandise shipments - Shipments in transit (f.o.b. shipping point) - Goods sold to customer outstanding - Good sold but will never be collectible - specific Inventory sold)
Amount of inventory fire loss = (77800 + 56300 - 140400*(1-42.7%) + 3320 + 880*(1-42.7%) + 25000- 2450 - 48500*(1-42.7%) - 8340*(1-42.7%) - 7340)
Amount of inventory fire loss = $ 40116
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