Question 1 Wildhorse Company lost most of its inventory in a fire in December ju

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Question 1 Wildhorse Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. The corporation's books disclosed the following Beginning inventory $158,100 Sales revenue Purchases for the year 391,500 Sales returns Purchase returns $646,500 22,000 Rate of gross profit on net sales 30% Merchandise with a selling price of $23,100 remained undamaged after the fire. Damaged merchandise with an original selling price of $15,700 had a net realizable value of $5,500 Compute the amount of the loss as a result of the fire, assuming that the corporation had no insurance coverage Amount of the loss

Explanation / Answer

Calculation for amount of Loss :-

Particulars Amount ($) Purchases 391500 Less : Purchase Return (31100) Add : Beginning Inventory 158100 Total 518500 Sales 646500 Less : Sales Return (22000) Net Sales 624500 Gross Profit (30% of $624500) 187350 Sales Excluding Profit 437150 Closing Inventory ($518500 - $437150) 81350 Cost of Undamaged Merchandise ($23100 * 70%) 16170 Cost of Merchandise damaged ($81350 - $16170) 65180 Selling Price of Demaged Merchandise 15700 Loss Amount ($65180 - 15700) 49480

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