Problem 9-7 On April 15, 2018, fire damaged the office and warehouse of Cheyenne
ID: 2563055 • Letter: P
Question
Problem 9-7
On April 15, 2018, fire damaged the office and warehouse of Cheyenne Corporation. The only accounting record saved was the general ledger, from which the balance sheet data below was prepared.
CHEYENNE CORPORATION
MARCH 31, 2018
Cash
$19,370
Accounts receivable
42,940
Inventory, December 31, 2017
67,960
Land
35,270
Buildings
100,730
Accumulated depreciation
$39,930
Equipment
3,569
Accounts payable
25,275
Other accrued expenses
9,155
Common stock
96,700
Retained earnings
47,390
Sales revenue
125,490
Purchases
47,390
Miscellaneous expense
26,711
$343,940
$343,940
The following data and information have been gathered.
Year Ended
December 31
2017
2016
Compute the amount of inventory fire loss. (Round ratios for computational purposes to 2 decimal places, e.g 78.52% and final answer to 0 decimal places, e.g. 28,987.)
CHEYENNE CORPORATION
MARCH 31, 2018
Cash
$19,370
Accounts receivable
42,940
Inventory, December 31, 2017
67,960
Land
35,270
Buildings
100,730
Accumulated depreciation
$39,930
Equipment
3,569
Accounts payable
25,275
Other accrued expenses
9,155
Common stock
96,700
Retained earnings
47,390
Sales revenue
125,490
Purchases
47,390
Miscellaneous expense
26,711
$343,940
$343,940
Explanation / Answer
CHEYENNE CORPORATION Computation of Inventory Fire Loss April 15, 2018 Inventory, 1/1/18 $67,960 Purchases, 1/1/ – 3/31/18 47,390 April merchandise shipments paid 3,281 Unrecorded purchases on account 14,150 Total 132,781 Less: Shipments in transit $2,203 Merchandise returned 1031 3,234 Merchandise available for sale 129,547 Less estimated cost of sales: Sales revenue, 1/1/ – 3/31/18 125,490 Sales revenue, 4/1/ – 4/15/18 Receivables acknowledged at 4/15/18 $46,120 Estimated receivables not acknowledged 8,550 Total 54,670 Add collections, 4/1/ – 4/15/18 ($12,950 – $950) 12,476 Total 67,146 Less receivables, 3/31/18 42,940 24,206 Total sales 1/1/ – 4/15/18 149,696 Less gross profit (43.68%* X $149,696) 65,387 84,309 Estimated merchandise inventory 45,238 Less: Sale of salvaged inventory 3,230 Inventory fire loss $42,008 *Computation of Gross Profit Rate Net sales, 2016 $382,590 Net sales, 2017 505,760 Total net sales 888,350 Beginning inventory $61,200 Net purchases, 2016 238,310 Net purchases, 2017 268,760 Total 568,270 Less: Ending inventory 67,960 500,310 Gross profit $388,040 Gross profit rate ($388,040 ÷ $888,350) 43.68% Note: if any doubet, please ask in comment or answer mismatch.
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