Castlevania Company lost most of its inventory in a fire in December just before

Question

Castlevania 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 $170,000 Sales $650,000
Purchases for the year 450,000 Sales returns 24,000
Purchase returns 30,000 Rate of gross margin on net sales 30%

Merchandise with a selling price of $21,000 remained undamaged after the fire. Damaged merchandise with an original selling price of $15,000 had a net realizable value (after the fire) of $5,300.

Compute the amount of the loss as a result of the fire, assuming that the corporation had no insurance coverage.

Fire loss on inventory $?

Explanation / Answer

=626,000 X 70% = 438,200 Ending inventory = Beginning Inventory + Net Purchases - Cost of goods sold Beginning inventory = 170,000 Net Purchases = 450,000-30,000=420,000 Ending inventory = 170,000+420,000-438,200 = 151,800

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