You are called by Tim Duncan of Spurs Co. on July 16 and asked to prepare a clai

Question

You are called by Tim Duncan of Spurs Co. on July 16 and asked to prepare a claim for insurance as a result of a theft that took place the night before. You suggest that an inventory be taken immediately. The following data are available.

Your client reports that the goods on hand on July 16 cost $30,950, but you determine that this figure includes goods of $6,690 received on a consignment basis. Your past records show that sales are made at approximately 40% over cost. Duncan’s insurance covers only goods owned.

Compute the claim against the insurance company.

Inventory, July 1 $ 41,680 Purchases—goods placed in stock July 1–15 91,280 Sales revenue—goods delivered to customers (gross) 118,700 Sales returns—goods returned to stock 3,490

Explanation / Answer

Cost of goods sold =$118,700*100/140=$84,786

Sales returns cost=$3,490*100/140=$2,493

Computation of the claim against the insurance company

Cost of own goods $57,357

particulars    Amount in $ Inventory $41,680 Add:Purchases $91,280 Sales Returns $2,493 Goods on consignment basis $6,690 Less:Cost of Goods sold ($84,786)

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