Gheorghe Moresan Lumber Company handles three principal lines of merchandise wit

Question

Gheorghe Moresan 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.

Lumber

Millwork

Hardware

Lumber 25% Millwork 30% Hardware and fittings 40%

Explanation / Answer

Submit your estimate of the inventory amounts immediately preceding the fire on Aug. 18, 2014:

Inventory at Cost , Aug. 18, 2014

(Balancing Figure) (A+B-E)

Particulars Lumber Millwork Hardware Inventory, Jan. 1, 2014 A $253800 $93520 $45300 Purchases to Aug. 18, 2014 B 1532500 381900 161600 Sales to Aug. 18, 2014 C $2055600 $564720 $254240 Gross Profit on Cost (percentage) D 25 30 40 Cost of Sales to Aug. 18,2014 [ C / (100+D)%] E $1644480 $434400 $181600

Inventory at Cost , Aug. 18, 2014

(Balancing Figure) (A+B-E)

$141820 41020 $25300

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