Exercise 9-17 You are called by Tim Duncan of Stellar Co. on July 16 and asked t

Question

Exercise 9-17

You are called by Tim Duncan of Stellar 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.

Inventory, July 1

$ 37,100

Purchases—goods placed in stock July 1–15

82,500

Sales revenue—goods delivered to customers (gross)

111,000

Sales returns—goods returned to stock

4,400

Your client reports that the goods on hand on July 16 cost $29,000, but you determine that this figure includes goods of $6,600 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. (Round ratios for computational purposes to 2 decimal places, e.g. 78.73% and final answer to 0 decimal places, e.g. 28,987.)

Claim against the insurance company

$

Inventory, July 1

$ 37,100

Purchases—goods placed in stock July 1–15

82,500

Sales revenue—goods delivered to customers (gross)

111,000

Sales returns—goods returned to stock

4,400

Explanation / Answer

Net sales = 111000-4400= $106600 Gross Profit percentage = 40/140= 28.57% Cost of goods sold = 106600*(1-28.57%)= $76144 Claim against the insurance company=(37100+82500-76144)-(29000-6600)= $21056

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