Smith Distributors, Inc., supplies ice cream shops with various toppings for mak

Question

Smith Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2018, a fire resulted in the loss of all of the toppings stored in one section of the warehouse. The company must provide its insurance company with an estimate of the amount of inventory lost. The following information is available from the company's accounting records: Fruit Toppings Marshmallow Toppings Chocolate Toppings Inventory, January 1, 2018 $ 26,000 $ 7,600 $ 3,600 Net purchases through Nov. 17 180,000 42,000 12,600 Net sales through Nov. 17 230,000 61,000 20,600 Historical gross profit ratio 15 % 30 % 35 % Required: 1. Calculate the estimated cost of each of the toppings lost in the fire.

Explanation / Answer

[230000(1-.15)]

(195500)

[61000(1-.30)]

(42700)

[20600(1-.35)]

(13390)

Fruit Toppings Marshmallow Toppings Chocolate Toppings Beginning 26000 7600 3600 Net Purchase 180000 42000 12600 lesS:cost of sales [sales (1-gross profit rate)]

[230000(1-.15)]

(195500)

[61000(1-.30)]

(42700)

[20600(1-.35)]

(13390)

Balance of inventory destroyed by fire 10500 6900 2810

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