Exercise 9-16 Gheorghe Moresan Lumber Company handles three principal lines of m

Question

Exercise 9-16

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

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

Submit your estimate of the inventory amounts immediately preceding the fire.

Lumber

Millwork

Hardware

Explanation / Answer

Gheorge Moresan Lumber Company Details Lumber Millwork Hardware a Inventory Jan 1 2014.           267,500.00      92,890.00       53,200.00 b Purchases to Aug 18,2014.       1,533,100.00    376,400.00     161,500.00 Sales to Aug 18. 2014.       2,070,300.00    550,420.00     240,660.00 Gross profit on cost 25% 30% 40% c Cost of sales upto Aug 18. 2014.       1,656,240.00    423,400.00     171,900.00 d Estimate of inventory immediately preceeding the fire =a+b-c= $      144,360.00 $ 45,890.00 $   42,800.00

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