(ACCT 3103 and 3113) Sweet Company lost most of its inventory in a fire in Decem
ID: 2546283 • Letter: #
Question
(ACCT 3103 and 3113) Sweet Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. Corporate records disciose the following. Inventory (beginning) 81,300 es revenue Purchases Purchase returns 285,400 28,300 $415,000 20,800 Sales returns Gross profit % based on net seing price 33% ndise with a selling price of $30,400 remained undamaged after the fire, and damaged merchandise has a net realizable value of $8,900. The company does not carry fire insurance on its inventory Compute the amount of inventory fire loss. (Do not use the retail inventory method.) Ooen Show WorkExplanation / Answer
To Complete the Question We can use the following.
Opening inventory +purchase +Sales Return@Cost = Cost of goods Sold +Purchase Return +Closing Inventory.
$81,300 +$285,400 +$13,93 6= $278,050 +28300 + Closing Stock.
$380,636 =$306,350 + Closing Stock
So, Closing Stock = $380,636 -$306,350 = $74,286.
To find the value of inventory damaged by fire
Closing Inventory = Cost value of inventory not damaged by the Fire + Cost value of Inventory damaged by Fire.
$74,286 = $20,368 + Cost value of inventory Damaged by fire.
The cost value of inventory Damaged by fire = $74,286 - $20,368 = $53,918
So, the value of inventory Damaged by fire = $53,918.
Lose of inventory due to fire = Value of inventory damaged by fire - NRV
= $53,918 - $8,900
Net loss = $45,018
Workings.
Cost of sales = Sales Revenue * Percentage of Cost of Sales.
= $415,000 *67% = $278,050
Cost of Sales Return = Value of Sales Return * Percentage of cost of Sales.
= $208,00 * 67% = $13,936
Cost of inventory not damaged by fire= value of inventory not damaged by fire* Percentage of cost of sales.
= $30,400* 67.5% = $20,368
Percentage Cost of Sales- 100%-Percentage of Gross profit.
= 100%-33% = 67%
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