Exercise 9-18 Bonita Lumber Company handles three principal lines of merchandise

Question

Exercise 9-18

Bonita 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. (Round ratios for computational purposes to 5 decimal places, e.g. 78.74265% and final answers to 0 decimal places, e.g. 28,987.)

Lumber

Millwork

Hardware

Lumber 25% Millwork 30% Hardware and fittings 40%

Explanation / Answer

Solution:

Particulars Lumber Millwork Hardware Opening inventory $247,600 $88,900 $45,700 Purchases $1,521,600 $372,700 $159,000 Sales $2,111,100 $483,600 $221,200 Gross Profit on Cost 25% 30% 40% Cost of Good Sold [Sales/(100+Gross Profit)*100] $1,688,880 $372,000 $158,000 Inventory immediately preceding fire (Opening Stock + Purchases - COGS) $80,320 $89,600 $46,700

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